New tax lack broad consultation -Tax expert

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January 4, 2016 5:26 PM

In an interview with Pulse Business, the law lecturer at the University of Ghana said the granting of 1% tax holidays to businesses and 15% on services could be counterproductive.

Lawyer and tax expert Abdallah Ali Nakyea has criticized government’s new tax regime as lacking broad consultation with key stakeholders.

Under tax holidays, companies are given time limits typically between 5 to 15 years from the start of their operations in Ghana where they are exempted from paying taxes. It gives special dispensation to companies to recover investment costs before coming into tax payment position.

Addressing the issue, Abdallah challenged the rationale for the new law. “Was it that government thinks the tax holiday was too much?,” he asked hypothetically.

On the 15% tax rates on services, he described the increase “as way too high.” According to him, increasing it from 5% to 15% can be counterproductive. He wondered if government actually considered the net margins of people before the imposition.

Government is already backtracking on 1% imposition of tax on local investors. In a statement today, the Finance Ministry said, “On the issue of the imposition of a 1% tax on interest earned by individuals, Government has already submitted proposals to Parliament to reverse the position.”

A new tax on petroleum products has resulted in a 28% upward adjustment of petrol prices. Commercial drivers are meeting to announce hikes in transport fares.

Mr. Abdallah however hailed the 75% of corporate tax rate on businesses operating outside Accra and Tema. He said the move will motivate companies to move outside the two cities to take advantage of this tax law.

He said the new tax regime achieves the idea of consolidating all taxes, and bringing out clarity.

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