In line with the policy advocacy objective GNCCI sought the assistance of Business Sector Advocacy Challenge Fund (BUSAC), funded by DANIDA, DFID and USAID, to undertake a study into how the Income Tax Regime impacts on the Cost of Doing Business in Ghana. GNCCI contracted AIDEC Consultancies International Limited and AA&K Consulting Services Limited. The study was encapsulated within the Advocacy for the Private Sector Programme of BUSAC.
In fulfillment of the above advocacy initiative, GNCCI undertook a study into the Income Tax Regime in Ghana; specifically, the impact of income taxation on corporate investment, business growth and development; administrative bottlenecks of the income tax administration. As part of the study GNCCI was to seek the views of stakeholders of the issues studied in a Sensitization Workshops that was organized in Accra and Kumasi. At the end of the two workshops which had participants from various stakeholders including the Revenue Agencies Governing Board, the Internal Revenue Service and the VAT Service, the issues and proposals discussed were documented and presented to Government as input in the 2007 Budget Statement with view to increasing Government Tax Revenue whilst ensuring growth of business in the private sector. A final diaogue workshop held at Marina Hotel, Dodowa with the Minister of Finance & Economic Planning, officials of the Revenue Service and the VAT Service resulted in some withholding taxes and the need for the Chamber of assist in the Government’s Tax Education Programme. The Chamber advocated for the reduction in withholding tax which was captured in the 2007 National Budgets as follows:
Dividends - 8% (10% previously)Management and Technical Services - 15%(20 previously)
Rent Income - 8%( 10% previously)
Capital Gains - 5% (10% previously)
Participants concluded that the audit capacity of the IRS is highly inadequate for any efficient and effective monitoring to be done to enhance collection.
To deal with the inadequate capacity of the Internal Revenue Service the Workshop proposed the following measures:
The number of auditors be doubled by 2008 Year Assessment. This would require recruiting about 100 auditors in the 2007 Year Assessment. Since it would require about the one-year to effectively and adequately train the newly recruited auditors, these should therefore be ready to take up tax auditor assignments in 2008.
Thereafter it is proposed that the number of auditors should be increased to about 500 in the next five years.
Where the recruitment and retention of qualified accountants for tax auditor assignments is proving difficult, fresh graduates with accounting and business backgrounds could be recruited and given intentsive training in tax auditing, as well as give them opportunity to write professional examinations and bonded to serve for a minimum number of years.
