Mr. Joe Ghartey, the former Minister for Railways Development, has called on government to implement prudent measures to reduce the corporate income tax (CIT) burden on companies.
This, he believes, in the long run will stimulate growth and development for the Ghanaian economy as well as for businesses.
“Reducing the rate of corporate tax may also have a net effect of increasing our tax revenue. Some countries have done this successfully, and it is worth looking at.”
Mr. Joe Ghartey
Mr. Ghartey, stated that these are challenging times for businesses and corporations; the government will be doing much good than harm to the businesses if it reduces CIT rates.
The former Railways Development Minister made this statement during the official launch of the University of Professional Studies’ (UPSA) Enterprise and Innovation Centre, which seeks to create opportunity for youths through enterprise and innovation.
Also, Mr. Ghartey noted that mass education is needed, especially on the various tax incentives and benefits which are available to Ghanaians.
This, he disclosed, will help particularly the private sector to leverage on thew reduced taxes, so as help with their business operations.
Also, Mr. Ghartey advised that government could provide other strategic incentives to the private sector in order to foster investments in prime sectors of the economy.
“This is already being done, and some sectors attract lower tax regimes than others. The rate of taxation also depends, in some cases, on location of the business or industry.”
Mr. Joe Ghartey
Corporate income tax in Ghana
As disclosed by the Ghana Revenue Authority (GRA), “general Corporate Income Tax rate is 25%. However, there are contemporary rates depending on the nature of business carried out by an entity, the location of the business and the specific industry in which it operates”.
Data from the GRA show that mining and upstream petroleum companies pay a CIT rate of 35 percent each, while companies principally engaged in the hotel industry pay a rate of 22 percent.
Similarly, financial institutions which lend to the agricultural and leasing sectors pay a CIT rate of 20 percent on income from those businesses.
However, companies engaged in non-traditional exports and manufacturing companies located outside Accra, Tema and other regional capitals pay reduced CIT of 8 percent and 12.5 percent respectively.
Ms. Adobea Asiama-Aboagye earlier this year, while representing the Association of Ghana Industries (AGI) on a panel discussion, stated that, taxes if not reviewed, will make businesses unable to take advantage of the Africa Continental Free Trade Agreement (AfCFTA).
Ms. Adobea hinted that, the existing economic conditions amid the taxes will only aggravate difficulties in the production and manufacturing value chains of businesses, and to a larger extent, affect livelihoods.
Gita Gopinath, an Economic Counsellor and Director of the Research Department at the International Monetary Fund (IMF), disclosed that disparities in national CIT rates have triggered a large amount of tax shifting.
She also revealed that, differences in CIT rates leads to tax avoidance, thereby reducing the tax base on which governments could collect revenues to fund needed economic and social spending.
Contrary to calls from stakeholder to reduce CIT in Ghana, Gopinath unveiled that the IMF is still studying the Biden administration’s proposal to raise the corporate tax rate to 28 percent.
Gopinath however noted that the former Trump administration’s decision to lower that tax rate from 35% to 21% in 2017 had had less impact on investment than initially expected.
READ ALSO: Integrate Banking Code of Ethics into Digital Service Provision – Fidelity Bank’s MD
