While the new income tax regime will help widen the tax base, the country risks losing revenue accrued by withholding taxes from specialised sectors following a revision of aspects of petroleum and mining agreements, Abdallah Ali-Nakyea - a Tax Consultant, has said.

“The stability clauses in new petroleum agreements, which protect investors from economic shocks until after a period of time, limit the imposition of taxes on such specialised operations,” he said at a one-day Breakfast Series themed ‘The New Tax Law and its Implications for the Economy and Businesses’.

“Under Section 71 petroleum operations’ rates have been increased to 15 percent withholding tax; my worry for the economy is that almost all the petroleum agreements we have today will have stability clauses, which means no change in fiscal legislation willll affect the investor until after a certain number of years,” he stated.

“I remember there was a renegotiation team for mining contracts, but I do not know how far we have gone with that. It is good for forward contracts, but those that are spent I think may not have significant benefit to the nation,” Mr. Nakyea added.

These concerns aside, he expressed confidence the new tax regime will help rope-in new tax payers.

“The new act has moved from source jurisdiction to worldwide income, and it’s good for the economy because it means now we have a wider tax base to get more income for the needed growth and development.

“Now, wherever your income is the tax will be collected. Non-resident rule has not changed, and the capital gains tax has also been added to the income tax to broaden the tax net,” Ali-Nakyea said.

The new Income Tax Act 2015, Act (896), was officially launched in 2015 -- aimed at revising and consolidating the law relating to income tax and simplifying the Act’s provisions.

The Act makes it more user-friendly, retains provisions that are peculiar to income tax administration, and enhances efficiency.

It also facilitates compliance while broadening the tax base -- removing the narrow and distorted tax base of the Internal Revenue Act 2000 (Act 592), thus rationalising, streamlining and restricting tax concessions in the country.

Mr. Ali-Nakyea expressed worry that the stability clauses in petroleum operations mean that the fiscal changes will not affect them, and/or benefit the nation in any way.

The Minister of Finance Mr. Seth Terkper explained that the new tax law became necessary because some tax payers were either avoiding or evading tax by hiding their income in areas which were previously not taxed.

He said the allowances are being taxed under the new income tax law, Act 896, 2015, because they are all forms of income no matter how they are earned. Under the new act, taxes on employee allowances such as clothing, as well as on retiring benefits, will attract a 20 percent tax.

The Deputy Commissioner in charge of Policy and Programmes at the Ghana Revenue Authority (GRA), Mr. Edward Gyamerah, advised that the penalty for failure to file tax returns is more punitive under the new Income Tax Act (Act 896).

He therefore urged businesses to file accurate self-assessment returns on time to avoid paying penalties. “The new penalty under self-assessment is a little bit large and so we expect businesses to ensure that they file accurate self-assessment reports,” he said.

He urged business owners to take a second look at their reports for the last quarter to effect any necessary changes, saying: “The new penalty regime is that if you underestimate your tax payable, you will be required to pay a penalty of 125 percent of the Bank of Ghana (BoG) discount rate; and this one will be compounded from the first month of your basic year”.

While indicating that the interest would be about 70 percent, he told the meeting: “We don’t take delight in imposing penalties, and that is why I am informing you to make sure you submit accurate returns every month and every quarter”.

He said the new act empowers the Commissioner-General of the GRA to request information without going to court, as pertained in the old law, and the bank is obliged to comply.

He also said while under the old law businesses were required to file their returns on or before commencement of the basic year, the new law requires returns to be filed on or before payment of the first installment.

Mr. Gyamerah explained that under the new act, resident and non-resident Ghanaians will now be taxed on worldwide income.

“The GRA can be privy to tax information on Ghanaians globally because Ghana belongs to the Global Forum for Exchange of Tax Information,” he said.

Other features of the new act, he said, will include a provision that allows businesses to carry forward their losses. Under the priority sector, however, losses cannot be carried forward for more than five years.

The new act also recognises lottery activity as an investment activity, which means that tax must be paid on investment income. However, five percent is to be paid on any gains that exceed GH¢2,592.

He again indicated that the new law ropes-in ‘galamsey’ operators to pay a tax of three percent on income, explaining that the tax will be indirectly paid by the people who do business with the ‘galamsey’ operators, adding that the ‘galamsey’ operators can apply to the Commissioner General of the GRA to be exempted from paying the tax.