By Kofi Ahovi
Ghana Trade Union Congress (TUC) has called on the government to cut down review the tax margins as well as extend the tax-free threshold for the 2010 national budget which will be ready in November this year.
This according to TUC is to ease tax burden on workers in the country.
In a 23 page proposal document to the government as the union’s input into the 2010 national budget and policy statement titled “regaining sovereign control over development policy-making”, it also called on the government to re-consider reviewing taxes on overtime and some cash allowances since it can lead to over-taxation. Saying, “Taxing cash allowances for fuel at source subject workers to double taxation since workers already pay tax on fuel at the pump stations.”
“We do not think Ghana’s tax system is fair, as workers in the formal sector are being overtaxed while even many wealthier people operating in the so-called informal economy do not pay tax. A tax system which allows these wealthy business men and women operating in the informal economy to evade taxes with impunity cannot only be described as unfair but also unjust,” the document stated.
TUC attributed the main reason for the unreasonably huge increases in personal income tax to the marginal taxes and the tax-free thresholds have remained the same since 2006. The tax-free threshold increased from GH¢180 in 2005 to GH¢240 in 2006 and has since remained unchanged even though nominal salaries have increased significantly in the last four years (2006 – 2009).
In this regard TUC in collaboration with the other organised labour groups is proposing an engagement with the government on the issue of income taxes as part of efforts to end the “unfair and unjust” tax system in the country.
According to TUC what Government has succeeded in doing in the past decade is to shift the burden of tax away from highly subsidised foreign products and from company profits onto the few formal sector workers whose salaries are acknowledged to be among the lowest on the African continent.
In the first half of 2009, total tax revenue amounted to GH¢2,162.6 million which represents 9.9% of GDP. The figure represents 17.2% higher tax revenue recorded during the same period in 2008. Direct taxes stood at GH¢708.5 million against end-period budget target of GH¢673.3 million which is 5.2% higher than projected and 29.6% above what was collected for the same period in 2008.
The Minister for Finance and Economic Planning, Dr. Kwabena Duffuor, also attributed the higher tax revenue to “the performance of personal income tax and other direct taxes,” Personal income tax for the first part of the year that is January-June 2009 stood at GH¢319.8 million against budget target of GH298.1 million, while company tax for the period was GH¢287.7 million. On the contrary, indirect taxes made up of VAT, import duties, excise taxes etc fell short of budgetary projections by 13.7%.
In 2008, total tax revenue amounted to GH¢4,299.5 million representing 25% of Gross Domestic Product (GDP) against a budget target of GH¢3,973.8 million. According to the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana the higher projected tax revenue was achieved because “direct taxes as a major component of total revenue performed quite well during the year exceeding the budget estimate and the outturn for 2007 by 11.3 and 33.3 percentage points respectively. Direct taxes as a proportion of GDP moved from 5.2% to 7.3% between 2000 and 2008.
The sharp increase in direct taxes is further attributed to increases in the Pay-As-You-Earn (PAYE) which actually increased by 31.1% over the amount recorded in 2007. In the year 2000, Personal Income and Property Taxes contributed 10.9% to total tax revenue. By 2007, the contribution of income and property taxes to tax revenue had increased to 13 percent. At the same time, company taxes declined consistently from 15.8% in 2000 to 13% in 2007.
Ghana Trade Union Congress (TUC) has called on the government to cut down review the tax margins as well as extend the tax-free threshold for the 2010 national budget which will be ready in November this year.
This according to TUC is to ease tax burden on workers in the country.
In a 23 page proposal document to the government as the union’s input into the 2010 national budget and policy statement titled “regaining sovereign control over development policy-making”, it also called on the government to re-consider reviewing taxes on overtime and some cash allowances since it can lead to over-taxation. Saying, “Taxing cash allowances for fuel at source subject workers to double taxation since workers already pay tax on fuel at the pump stations.”
“We do not think Ghana’s tax system is fair, as workers in the formal sector are being overtaxed while even many wealthier people operating in the so-called informal economy do not pay tax. A tax system which allows these wealthy business men and women operating in the informal economy to evade taxes with impunity cannot only be described as unfair but also unjust,” the document stated.
TUC attributed the main reason for the unreasonably huge increases in personal income tax to the marginal taxes and the tax-free thresholds have remained the same since 2006. The tax-free threshold increased from GH¢180 in 2005 to GH¢240 in 2006 and has since remained unchanged even though nominal salaries have increased significantly in the last four years (2006 – 2009).
In this regard TUC in collaboration with the other organised labour groups is proposing an engagement with the government on the issue of income taxes as part of efforts to end the “unfair and unjust” tax system in the country.
According to TUC what Government has succeeded in doing in the past decade is to shift the burden of tax away from highly subsidised foreign products and from company profits onto the few formal sector workers whose salaries are acknowledged to be among the lowest on the African continent.
In the first half of 2009, total tax revenue amounted to GH¢2,162.6 million which represents 9.9% of GDP. The figure represents 17.2% higher tax revenue recorded during the same period in 2008. Direct taxes stood at GH¢708.5 million against end-period budget target of GH¢673.3 million which is 5.2% higher than projected and 29.6% above what was collected for the same period in 2008.
The Minister for Finance and Economic Planning, Dr. Kwabena Duffuor, also attributed the higher tax revenue to “the performance of personal income tax and other direct taxes,” Personal income tax for the first part of the year that is January-June 2009 stood at GH¢319.8 million against budget target of GH298.1 million, while company tax for the period was GH¢287.7 million. On the contrary, indirect taxes made up of VAT, import duties, excise taxes etc fell short of budgetary projections by 13.7%.
In 2008, total tax revenue amounted to GH¢4,299.5 million representing 25% of Gross Domestic Product (GDP) against a budget target of GH¢3,973.8 million. According to the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana the higher projected tax revenue was achieved because “direct taxes as a major component of total revenue performed quite well during the year exceeding the budget estimate and the outturn for 2007 by 11.3 and 33.3 percentage points respectively. Direct taxes as a proportion of GDP moved from 5.2% to 7.3% between 2000 and 2008.
The sharp increase in direct taxes is further attributed to increases in the Pay-As-You-Earn (PAYE) which actually increased by 31.1% over the amount recorded in 2007. In the year 2000, Personal Income and Property Taxes contributed 10.9% to total tax revenue. By 2007, the contribution of income and property taxes to tax revenue had increased to 13 percent. At the same time, company taxes declined consistently from 15.8% in 2000 to 13% in 2007.
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