The President, John Dramani Mahama, and the Finance Minister, Seth Tekper, have both discounted reports in some sections of the media that, government intended to introduce new taxes soon.
Their quick outing, has doused claims by the running mate of the New Patriotic Party (NPP), Dr. Mahamudu Bawumia, who has pointed out that, the NPP once elected would immediately review the various taxes that have burdened the Ghanaian people and the private sector.
While, President Mahama on his twitter handle on Thursday, assured Ghanaians that his administration, has no plans to undertake such a move, the Ministry of Finance, has subsequently clarified the Minister’s position after Ghanaians started reacting angrily to the news.
But the NPP running mate, adressing students and lecturers of the E.P. College of Education, Amedzofe in the Volta Region on Wednesday, asserted that the NPP under Nana Akufo-Addo, has a significantly different vision which does not focus on taxation, but on productivity, jobs and the welfare of the Ghanaian people.
In a statement, the Finance Ministry, said that the media “misrepresented the comments of the Minister to say that income tax imposes a tax on pensions.”
President Mahama’s disclaimer comes after the Finance Minister, at a Graphic Business forum had insisted that allowances must be taxed to prevent people from evading tax payment.
“Yes allowances must be taxed. Allowances are income. The issue I know is a very difficult one, it’s about taxing income and if you do not define income broadly, you will have tax payers either through avoidance or hiding the income in areas which are not taxed. It’s a thorny one. But remember that as you make your social security contributions, they are exempted from tax even though it is part of your income,” the Minister explained.
It clarified that the reference to the pension scheme in his delivery was to “explain the philosophy of taxation of pension adopted generally in literature and in countries that tax pensions.”
The Ministry further, insisted pensions are exempted from taxes per the laws of the land.
According to the ministry, an earlier explanation made by Mr. Terkper on the Income Tax Act, 2015 (Act 896) at a forum on Tuesday has been misconstrued.
It pointed out that Article 199 (3) of the Constitution states that “the pension payable to any person shall be exempt from tax”.
The statement further explained that the Income Tax, 2015 (Act 896) treats pension as an exempt amount under Section 7(1)(d) which means that any amount paid as pension shall not be taxed.
It however indicated that, under Section 112 (5) of the National Pensions Act, 2008 (Act 766), where voluntary contributions are made to a pension fund and if withdrawal from the fund is made before one goes on pension, the amount will be taxed appropriately, and if the contribution is not up to ten years for those in the formal sector and five years for those in the informal sector.
It continued that section 112 (5) of Act 766 further provides “A withdrawal of all or part of a contributor’s accrued benefits under a provident fund or personal pension scheme”.
Dr. Bawumia, had said the party will review the Income Tax Act 2015 to abolish the taxes on pensions and allowances as soon as it takes office.
“An NPP government will build the most business friendly and most people friendly economy in Africa. This means that job creation will be at the heart of economic policy. A lot of the other taxes we are seeing today will be scrapped. We will reduce the tax burden on our people and businesses so that they can employ more people and introduce a Tax Credit scheme for Companies that employ fresh graduates so that we will increase the employment of fresh graduates”, he said.
Dr. Bawumia explained that pensioners are one of the most vulnerable persons in society and that in the view of the NPP, gains made on investments in Pensions are part of pensions and should be protected.
This he said, would not only make pensioners more comfortable, but will also ensure that individuals have a bigger capacity to invest in businesses or simply increase savings and therefore, access to credit.
In the NPP’s view, the ideal way to increasing tax revenue is by formalizing the economy through the issuance of National IDs and a properly functioning Property Address system, which will expand the tax net and by growing the economy through a focus on jobs and productivity.
Dr. Bawumia, took on the government for its incessant penchant to tax almost anything, and observed that if the John Mahama- led administration finds a way, it will even impose taxes on the air Ghanaians breathe.
While dissecting the causes of the economic and social crisis Ghana finds itself in today, Dr. Bawumia, pointed out that the current slump in the economy had been occasioned by the government’s mismanagement, corruption and incompetence and that in their desperate bid to find a way out, the government had resorted to imprudently imposing taxes on every conceivable item.
“In response to the reckless management of our country’s economy and resources, which has led Ghana back to the doorsteps of the IMF, the government resorted to imposing taxes on every conceivable item in attempt to raise resources to fill the deep hole their incompetence and corruption had dug. In their desperation to fill the hole they have dug.
“The government imposed taxes on condoms, cutlasses, savings; today they are imposing taxes on pensions and allowances. Anything they think they can impose taxes on, they are imposing taxes on it – even if they think they could impose taxes on the air we breathe today, they would have imposed taxes on it,” he said.
Dr. Bawumia, noted that as a result of the desperation to raise revenue, chiefly because the government’s reckless borrowing and corruption had created a huge hole, the government was failing to see the dangers their unquenchable thirst for taxes were spelling for the economy.
“In so doing, they do not even understand that this is actually hurting the economy but they are so desperate for revenue that they are not even thinking about the economy”, he said.