CORPORATION TAX IN GHANA: A CONCERN FOR RURAL COMMUNITIES

WHAT IS THE PURPOSE OF TAXATION IN GHANA?

 

The answer seems obvious, the purpose of taxation should aim at the common good of the society.

In recent years the government has been putting a lot of measures in place and thinking of new ways to generate revenue through taxation. A lot of people have offered creative ideas to increase government revenue from taxation and as a result, there has been a lot of tax increments and the introduction of new ones.

The idea that many residents in Ghana do not pay taxes is not completely wrong. A critical study can show that it is obvious and this situation has led to the government brainstorming about how to get many residents to pay taxes.

I ask myself always, what is the purpose of this tax that the government wants whoever is eligible to pay. In simple terms, the government collects money from residents, which is compulsory, and uses the money for the greater good of the society. One aspect of this statement is the collection of revenue which seems to be the focus, and the second aspect is the spending of the revenue.

I believe tax revenue is supposed to bridge the gap between the rich and the poor. Most taxes in Ghana are regressive in practice. The poor bears almost all the burden but very little is done to reduce their plight. Most parts of the country are highly underdeveloped. The gap between the cities and other towns is very wide. It’s no surprise that people keep migrating to the cities. The government can use the tool called tax to reduce this problem.

I would like to introduce you to the income tax act 896. It did make some changes to the previous act 592 and I think you should look at it. Below is a summary of some of the components of it particularly on corporation tax.

                                                                                                         Previous          Current

•       Location                                                                               Act 592             Act 896

•       Accra/Tema                                                                           25%                   25%

•       Other Regional Capitals (except Northern, Upper East

•       and Upper West Regions)                                                   18.75%               25%

•       Northern, Upper East, and Upper West Regions              0%                     25%

•       Free Zone Enclave                                                                0%                     25%

•       Outside other Regional Capitals                                         12.5%                25%

What is the purpose of this tax structure? It’s obvious the government wants to increase revenue. What happens when the government gets this revenue to the detriment of many parts of the country? There are many parts of the country where the establishment of a company would do so well for them. Yet the government has enacted a tax structure which gives entrepreneurs no incentive to move to deprived communities.

How do many rural communities entice entrepreneurs to establish businesses in their communities which lacks basic amenities when the company will be paying the same tax rate as those in the big cities where roads are better and a lot of facilities exist to make the running of business easier?

Public lighting levy in Ghana

               

Levies exist in almost every country and Ghana is no exception. Various levies are collected in Ghana and among them are the social mitigation levy, road fund levy, public lighting levy, national health insurance levy etc.

Levies and taxes are not the same. Revenues from taxes do not have any specific purpose. The government determines how the revenues would be used. However, levies have a specific purpose. This means funds from levies are spent on the purpose for which it was collected.

The public lighting levy in Ghana is meant to provide and maintain street lights. The levy used to be 5% per kilowatt hour but has been amended to 2% per kilowatt hour. Even though residents pay this levy, there is a problem with its implementation.

Most communities in Ghana do not have streets lights and for those communities which have, many do not function. If you reside in Kumasi, you would be aware that places like Adum, Nhyieso, Danyame, Santasi, Asafo etc. do not have street lights or most of the street lights installed do not function.

In the capital, the situation is not different, streets lights are absent in most communities and most importantly, non-functioning street lights are rampant in the whole country. The maintenance culture is of grave concern to residents.

About 60% of installed street lights do not function and for Ashanti region, 80% of street lights in Kumasi do not function. www.ghanaweb.com/ghanahomepage/regional/kumasi-streets-in-total-darkness-430192. The lack of and non-functioning of street lights do have consequences. It is an open secret that crime rates are high in areas where there are no street lights or non-functioning street lights. Residents are aware of the benefits of streets lights and the dangers of not having it. This is evident in the many calls on the government to fix the situation.

Many accidents have occurred due to lack of street lights or nonperforming street lights. The situation is not peculiar to Ghana. A research conducted by telegraph UK confirmed this statement. www.telegraph.co.uk/motoring/10756488/accident-rates-worse-when-street-lights-switched-off.html. In Ghana, www.peacefmonline.com/pages/comment/features/200912/34510.php published an article attributing 70% of road accidents in the night to missing street lights or non-functioning street lights.

Whoever the electricity company of Ghana supplies electricity, pays a levy for public lighting. People pay because it is compulsory and also because it would be used to provide and maintain street lights. Unfortunately, people don’t see the benefit of paying the levy. People plead with the government all times to install street lights at certain locations and also to replace bulbs. 

The irony is that they are pleading with the government to use their money for the intended purpose because there is no system of accountability. You don’t know how much was collected and how it was used. To plead to the government to make streets safer is because it is not a priority for the government. It shows the abuse of the funds by the central government. In most cases, the government treats the funds from this levy as tax revenue which is the basis for the street lighting problem.

Residents have paid this levy for decades yet the situation keeps getting no better. Levies are different from taxes and when residents do understand this then the problem could be solved. People have stood for their rights in the past because they knew their rights. Levies are for a direct benefit and residents should hold authorities accountable starting with the assemblymen.

When you pay for a watch, you must be given a watch, when you pay for a shoe, you must be given a shoe. When you are not given what you have paid for you must insist and demand it. It is a matter of right because you have paid for it.