<\/p>\n
In our previous article, we provided am overview of the PwC\/World Bank Doing Business Report with key focus on Paying Taxes. We also discussed Ghana\u2019s position under the \u201cEase of paying taxes\u201d ranking as well as the Ffrequency of filing and payment of taxes\u201d.<\/p>\n
In this article, we continue to discuss two other indicators \u2013 total tax rates and technology and compliance. We also explore the link between tax reforms and development.<\/p>\n
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Total Tax Rate (% Profit)<\/strong><\/p>\n This section takes into account the total amount of taxes paid (i.e. Profit or corporate income tax, Social contributions and labor taxes paid by the employer, Property and property transfer taxes, Dividend, capital gains and financial transactions taxes, vehicle, road and other taxes) relative to the amount of profit made within the year by the small-medium sized entity.<\/p>\n Report (2012 \u2013 2017), this is the percentage of profit paid as taxes by businesses over the years. The total tax rate (TTR) is currently at 32.7 per cent from a low of 22.9 per cent in 2012. The TTR is made up of Profit taxes of 18 per cent (driven mainly by a 25 per cent corporate income tax) and Labour taxes of 14.7 per cent. Profit taxes comprise of corporate income taxes as well as taxes which are based on profitability such as National Fiscal Stabilisation Levy.<\/p>\n Technology and compliance<\/strong> <\/p>\n A major trend across various countries covered in the paying taxes survey is the use of technology to aid tax compliance.<\/p>\n Technology can make it easy for taxpayers to comply through online filing returns and making tax payment through mobile banking as an example. <\/p>\n The total time spent complying with taxes is also significantly reduced as a result. <\/p>\n Technology also the ability to strengthen tax administration by using \u201cbig data\u201d as part of risk assessment to target high risk taxpayers who may default. It can also aid in tracing payments and related transactional taxes.<\/p>\n Across Africa, the use of technology has not kept pace with changes taking place in other parts of the world. The table below shows tax reforms by tax authorities across various regions of the world between 2010 and 2014.<\/p>\n Although some countries have introduced e-payment and e-filing for example, very often, there is duplication in the process, as a subsequent hard filing or sending proof of payment has to be resubmitted to the tax authority. In Ghana, social security contributions as compulsory payments required by law is included as a tax and forms part of the indices.\u00a0\u00a0\u00a0 As much as progressive the idea was to split contributions between SSNIT and private fund managers, the negative impact of this new law was that another level of compliance was created for the tax payer. Instead of making a singular payment to Social Security and National Insurance Trust, the law required instead of a single monthly contribution, two or three (if Tier 3 is applicable) different types of payments to be made on a monthly basis. Although payments can be made through banks or online (SSNIT is also able to confirm payments electronically), the amount of time taken to comply with labour taxes has not reduced as a result of this added layer of compliance.<\/p>\n Congo in 2012 introduced a single statutory rate which is paid to a single body thereby, replacing three labour taxes and simplifying on a significant basis the total compliance time for taxpayers. This could be an example for Ghana to follow.<\/p>\n Advancement in electronic\/internet payment system, has had an effect on tax administration and compliance. The table below shows that not many countries in sub-Saharan Africa have fully taken advantage of advancement in technology.<\/p>\n Tax reforms and development\u00a0\u00a0\u00a0<\/strong>
<\/p>\n Taxes are essential for development and the government will need all the revenue that can be raised to achieve its targets of providing education and quality health care. There may not be a one size fits all tax policy but some general qualities of what a good tax system is can be objectively assessed. The Paying Taxes survey aims to achieve such a feat through the process of benchmarking and encouraging debate on broad tax policy areas.<\/p>\n Research studies provide evidence that the easier it is for taxpayers to comply with taxes the more probable it is that they will register and comply with their taxes. Similar empirical evidence support the assertion that beyond a certain rate of taxation, businesses may find it easier to avoid paying taxes or that high tax rates may simply be a disincentive to businesses from taking further risks.<\/p>\n The West African sub-region is in competition as a destination for foreign investment. Investors do tend to compare taxes as one of the factors to decide on a single location to invest in.\u00a0 Getting right taxation can increase domestic investment and business expansion as well as encourage foreign investors to invest in Ghana rather than another West African country. The idea is that by gradually working on the various indices of the Doing Business report, including ease of paying taxes, businesses will grow, new businesses will be formed and overall government revenue will increase.<\/p>\n
<\/p>\n \t\t\t\t\t\t\t\t\t\t\t\t\t In our previous article, we provided am overview of the PwC\/World Bank Doing Business Report with key focus on Paying Taxes. We also discussed Ghana\u2019s position under the \u201cEase of paying taxes\u201d ranking as well as the Ffrequency of filing and payment of taxes\u201d. In this article, we continue to discuss two other indicators \u2013 […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-394617","post","type-post","status-publish","format-standard","category-business"],"yoast_head":"\n
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The law governing social security contributions has also seen a number of changes, the most significant was the introduction of National Pensions Act, 2008 which brought about the Three Tier system. <\/p>\n
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A part of the development process is to ensure that the tax policy and administration is able to support the growth and development agenda.<\/p>\n
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