Talking Drums

The West African News Magazine

Ghana's Taxation System Need for a Comprehensive Approach to Review

By K. Amoo-Asante

Many Ghanaians have been heavily fined or prosecuted for non- payment of taxes since the PNDC took over power. The question many professionals ask is whether the country's revenue collection is properly organised to encourage people to pay up. In this article the writer points out loop-holes in the system and offers suggestions.
Ghana has educated and trained men and women capable of steering it to a successful and prosperous future. Yet at its critical period these men and women are unavailable to help it. A vacuous government official, unappreciative of the seriousness of the problem, boasts of a transfer of technology and manpower to developed countries, without recognising the effect on the country.

It is not only due to the brain drain caused by economic conditions, but also by the inept leadership of the current military junta. The result has been square pegs in round holes in a proportion unprecedented in the annals of Ghana's history. One wonders how some people are able to execute the jobs properly and efficiently. But it is a well-known fact that in the land of blind men, the one-eyed man is king. Putting it more bluntly, in the absence of nothing, bad is good.

It is in the light of the above, that this writer reviews some of the measures of the government which affect the economy and concludes that the brain drain is biting and biting severely.

It is often the complaint of some people that our intellectuals are incapable of adapting what they learn to our needs. This statement is sometimes correct, particularly if you look at the current measures of this confused government.

An expert opinion on the current measures would lead to the conclusion that those involved do not understand or appreciate taxation as an implement for sharing resources as well as changing culture, society and behavioural pattern.

The current government has made great noises about taxation. In some cases, distinguished Ghanaians have seriously been criticised for not paying tax large enough to correspond with the revenue they earn. No consideration has been given to the well-known dictum of Lord Clyde (Ayrshire Pullman Motor Services and Ritchie v. CIR) [14 TC 754]: "No man in this country is under the smallest obligation, moral or other, so as to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest shovel into his stores".

This is not to say that the writer condones illegal action, indeed the writer believes also the words of Lord Cairns in Partington v. Attorney General [LR 4HL 100]: "If the person sought to be taxed comes within the letters of the law, he must be taxed however great the hardship may appear to be. On the other hand, if the crown cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be".

In an attempt to improve taxation in Ghana, no coherent comprehensive approach has been adopted. Instead a series of ad hoc measures and decrees have been made which have created even more problems. Evasion is made possible where the administration is obviously incapable of policing and administering the Tax Laws enacted. A review of the current taxation will help to deal with the situation. It should be noted that my source is Home Front - Ghanaian news and Views of March to May 1985 - a publication of the Ghana High Commission in London.

This allowance is also available to unmarried men with two or more children who depend on him. Is the policy of the government to encourage illegitimacy or to encourage men and women who already have only one child to have one more?

Readers of the above-mentioned publication will note that the 1985 Budget gets great prominence; so with this it seems to be a very official source. No exclusion clauses have been attached to this which naturally means the government's views are expressed in it.

Personal Allowances

In the budget, personal Income Tax allowances for education expenses is raised from $300 per annum per child to $1000. In a country where direct taxation affects only workers and the main tax payers are cocoa farmers who will want to fall within this, one wonders what the relevance of this is. Does it mean that my father the cocoa farmer will be able to claim the C1000 reduction of the tax paid bring the on the poor producer price (which we agree is a form of taxation)? What attempt does this allowance help with unnecessarily large families? Irrespective of the number of children in secondary school, that person will pay C1000 each. Will the person need to be the one who actually pays the school fees? What if the person has a government, school, Cocoa Marketing Board scholarship? Will there be a reduction? What checks are there to ensure that ghost children no are included? No consideration of obvious interaction of transactions is considered.

Self Employed

20% of the taxable income of self- employed will be allowable. Well, it gives a boost to the self-employed, but will all self-employed persons be considered eligible? One would have thought that people involved in "KTBT" (koto beton) buy and sell business will not be eligible and yet from my reading they are eligible. What a day for briefcase self-employed businessmen! Dependents' allowance Basic Tax allowance in respect of dependents is raised from C1500 per annum to C5000 per annum and may be claimed by both men and women whether married or unmarried. It is easy to question the wisdom of this. Who is a dependent? How is the government going to know whether the person actually has a dependent? Will this not be an automatic allowance for everyone in a country not covered by it. Does it mean that if I give £1 to my aunt, I can claim this, and my aunt gives 50p to her cousin, she can also claim the allowance?

Married Persons Allowance - C1500

People who have lived in the UK are very rarely aware of this form of allowance Ghana has created this type of allowance There is the introduction of a married woman's allowance, that is, a woman who maintains her husband and their house hold. What is the definition of "maintain' and what measures are there to stop the man and the woman (couple) from bot claiming this if the couple are working and both are maintaining the household. No provisions have been included to discourage fraud.

This allowance is also available to unmarried men with two or more children who depend on him. Is the policy of the government to encourage illegitimacy or to encourage men and women who already have only one child to have one more? In other words why two children and not one? Also what mechanism is there to prove that the number of children presented for the claim is correct?


When Rawlings took power in 1979, there was an attempt to kill any ideas of perks. Their poor understanding of perks led them to issue a directive for the painting of all business cars used as perks with the very names of the establishment and business. To use such cars outside office hours was illegal. The reasons are due to the jaundiced ideas of what perks are. Perks are prerogatives, obtained by one's status. If the government then felt that they wanted to discourage them they could have considered them as part of the income of the person obtained them and subsequently tax them even at a higher rate of tax will achieve that end. Up to now, no attempt has been made to deal with the problem in a more civilised way.

Instead, sheer brute force typical of the strong man of the village has been used to discourage perks to the extent that people still enjoy them if only in a car painted with the Company's name. No system of taxation has been developed to deal with it. One would have thought that in line with the continuing policy of streamlining the tax system this area will be dealt with. Yet a blind eye has been turned on it. In future, it may be necessary to consider perks taxed at the highest rate possible in order to discourage them. It should be noted that cars have been considered as the only perk, but there are other perks that can be dealt with. Higher Rates of Taxation There are higher rates of taxation according to the publication though the rates are not published. The writer will like to ask why no effort has been made to ensure that no one can use any allowance to relieve income at a higher rate of taxation. In other words, the allowances, reliefs and exemptions should be available for tax relief at 22% only. This will lead to 572% taxable income for all allowances exemptions and relief payable by a tax payer at the 60% bracket. Is this ignorance or desire not to burn the hands that produced the "streamlining policy" of taxation.


From the above, it can be seen that there are serious loopholes in the so-called attempt to streamline the taxation system. What is needed is a coherent compre- hensive policy of dealing with the taxation system of Ghana by experts from the legal, tax and accountancy professions as well as members of the business community to view the problem in a more practical, coherent and comprehensive manner.

In concluding, the writer will like to know whether there are any provisions to prevent the ruling Junta from paying tax and, if so, what is the reason for that. Also one would find it interesting to know that by these exemptions, relief etc. a man availing himself of all reliefs etc. and earning C12500 per annum will pay tax of C125, a tidy sum indeed. The calculation is as follows:

Item Amount(Cedis)
Basic exemption 5000
Personal relief 1500
Education relief 1000
5000 X 2 ½ % C125
Total C12500
This incidentally is just tax of 1% of total income. Is this not too low?

In the UK, a person in such a similar situation would have paid 30% tax of his total income. At a time when certain members seem satisfied with exceeding the budget estimates for tax collected one should remind them that budget estimates of tax should be related to the GNP. In the UK and other countries, an attempt is made to obtain 30% of GNP as tax. The writer is reliably informed that according to UN sources, total tax collected formed eight per cent of GNP as compared to 16 per cent in the late sixties and early seventies. If the Ghana government can achieve this it would make a great stride. Then I am sure there will be no taxation of 1% of total income as well as budget estimates which are too low for a start.

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