Personal Taxes

Private tax breaks and the way in which to go

It is good to note that good tax legislation should have four characteristics, namely: ensuring justice or equality, ensuring a stable economy, convenience in its administrative processes, and must be safe.

On December 28, 2019, the government changed the tax brackets for private earners with effect from January 2020. The aim of the change was to increase the net income of resident natural persons. However, the government enacted the Income Tax Act (Amendment) 2019 (Act 1007) to revise personal tax breaks, among other things.

A personal tax break is a grant or tax exemption given to a resident natural person to reduce their tax burden. A tax break should relieve the “shoulders” of taxpayers considerably.

A resident can contact the Commissioner General in a prescribed form and can be obtained from any of the GRA’s domestic tax revenue departments across the country.

Discharge is granted in relation to a personal situation indicated in the application form. In this article we analyze personal tax breaks and give some recommendations.

First, exoneration or responsibility is granted to a resident natural person who is caring for his or her wife or husband or at least two children. The taxpayer must prove that he is married and that he can present a marriage certificate as proof.

On the application for tax relief, it is not noted whether the other spouse has submitted a declaration of care by the taxpayer or not.

The relief is currently GH ¢ 1,200 per year. Previously, a natural person who had a dependent spouse or at least two dependent children was entitled to personal relief of two hundred currency points or GH 200 according to the fifth table of the Income Tax Act 2015 (Act 896); It is highly recommended that this relief be revised upwards as recent increases in average fuel prices from 4.71 ghs in December 2020 to GH ¢ 6.33 in July 2021 show a 34% increase in average fuel prices.

Despite the fact that the National Tripartite Committee (NTC) raised the National Daily Minimum Wage to GH ¢ 12.53, which is a 6% increase over the value of GH ¢ 11.82 in 2020, I would humbly suggest that a further increase in the marriage or responsibility relief from GH ¢ 1,200 to a minimum of GH ¢ 3,600 (10 ghs per day times 360 days) would be far realistic.

Second, the child-rearing allowance is granted to a resident who pays their child’s school fees. The relief is granted to a maximum of three children who attend a recognized registered educational institution in Ghana. For the purposes of this Act, a child includes an adopted child or a ward. Both parents cannot claim this relief for the same child / children. The relief is currently GH ¢ 600 per child and year.

Previously, according to the fifth table of the Income Tax Act 2015 (Act 896), a person who promotes the education of the child or the community of that person in a recognized registered educational institution in the country, this person was entitled to personal relief of two hundred currency points per child or ward up to a maximum of three children or wards; I humbly recommend that the current GH ¢ 600 relief (equivalent to 1.60 ghs per day) should be further adjusted to GH ¢ 1,200 (3.30 ghs per day by 360 days) to address some of the difficulties of taking over Compensating for responsibility in growing children as they raise them.

Thirdly, disability assistance is granted to people who can prove, to the satisfaction of the Commissioner General, that they are disabled. This relief is granted to disabled people who receive income from commercial or professional activity and does not apply to persons who receive income from capital investments.

The disability relief corresponds to that of the fifth appendix of the Income Tax Act 2015 (Act 896); 25% of the disabled person’s earned income. The principle of this facilitation is to encourage disabled people to participate in companies or to work actively.

Fourth, old age relief is granted to people who have reached the age of 60. The relief is GH ¢ 1,500 per year. Previously, according to the fifth table of the Income Tax Act 2015 (Act 896), in the case of a person who is sixty years of age or older, that person was entitled to personal relief of two hundred currency points or 200 ghs.

I strongly advocate that the old-age relief of GH ¢ 1,500 per year is rather very low, as the pensioners who fall well under this category have little or no income to buy basic needs. I strongly recommend that the GH ¢ 1,000 can be further adjusted upwards to GH ¢ 3,600 (10ghs per day for 360 days).

Fifthly, old age benefits are granted for dependents in need of care who are caring for a relative aged sixty or older. Relief is granted to a maximum of two relatives. The exemption does not apply to the spouse or child of a dependent. Two people cannot invoke this relief for the same relative.

The relief is GH ¢ 1,000 per year. Previously, according to the fifth table of the Income Tax Act 2015 (Act 896), in the case of a natural person who has a dependent relative who is sixty years of age or older, other than a child or spouse, that person was entitled to personal relief of one hundred currency points or 100 ghs, but that person can only claim relief in relation to two dependent relatives.

It is highly recommended that the 1000 ghs be increased further up to GH ¢ 3,600 (10 ghs per day to 360 days) considering the burden of buying food, clothing, water, shelter and medication for the elderly.

Sixth, parenting allowances can also be granted if that person is receiving training to update their professional, technical or professional skills or knowledge. The relief is GH ¢ 2000 per year.

Previously, according to the fifth table of the Income Tax Law 2015 (Law 896), a person who had completed training to update the professional, technical or professional skills or knowledge of the person was entitled to personal relief equal to the cost of training not more than four hundred Currency points or GH ¢ 400.

I strongly recommend further adjusting this relief to a minimum of GH ¢ 5,000. This is because, as part of the stated education, many students should be encouraged to take their courses for the good of the country.

Personally, I believe this group will be further encouraged to contribute their quota to the economy, either through paying taxes or through improved productivity.

Finally, mortgage relief, also known as a mortgage interest break, is a tax break based on the amount of qualifying mortgage interest that a taxpayer can pay on a primary residence in a given tax year, and that break can only be on a building. This relief should be welcomed as it shows concern for the taxpayer who has made enormous commitments in his place of residence.

According to Afrobarometer Briefing Paper No. 124 Tax Administration in Ghana: Perceived Institutional Challenges by Daniel Armah-Attoh and Mohammed Awal (December 2013) “It is not surprising to find that fairness or taxes are high and unaffordable. Since 2008, the government has made efforts to improve tax revenue mobilization.

As a result, some previously untaxed products and services (tax on communications services; 20% tax rate on local gin and purified water in 2010 that eventually failed implementation; and 10% unexpected profit tax on mining companies proposed in the 2012 budget, etc.) now taxed while rates have been changed for others (e.g., increasing tolls by 100% in 2010; increasing corporate tax rate from 25% to 35%, etc.).

Somehow, citizens and corporations generally view the introduction of new taxes or tax rate changes as a social punishment and an increase in economic problems.

Increasing the personal tax breaks for Ghanaians will motivate taxpayers to appreciate the fairness of our tax system.

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