It is good to note that a good tax legislation should have four attributes namely: ensure equity or equality, ensure a stable economy, possess convenience in its administrative procedures and must be certain.
On 28 December 2019, the government amended the tax brackets for personal income earners, effective January 2020. An objective of the amendment was to increase the net earnings of resident individuals. The government however legislated the Income Tax (Amendment) Act, 2019 (Act 1007) to revise the personal tax reliefs, among others.
A personal tax relief is a grant or allowance provided to a resident individual to reduce his or her tax burden. A tax relief is supposed to take off a significant weight or burden off the ‘shoulders’ of tax payers.
A resident individual can apply to the Commissioner-General in a prescribed form and can be obtained from any of the GRA’s Domestic Tax Revenue Division offices across the country.
The relief is given with respect to a personal situation as stated on the application form. In this article, we shall analyze the personal tax reliefs and make some recommendations.
Firstly, the marriage or responsibility relief is granted to a resident individual who takes care of his wife or her husband or takes care of at least two children. The tax payer must prove that he or she is married and has a marriage certificate as evidence.
What is not shown on the tax relief application form is whether the other spouse has made a declaration of been taken care of by the tax payer or not.
The relief is currently GH¢1,200 per year. Previously, per the fifth schedule of the Income tax Act 2015(Act 896), in the case of an individual who has a dependent spouse or at least two dependent children, that individual is entitled to a personal relief of two hundred currency points or GH¢200; It is highly recommended that this relief should be revised upwards, considering recent hikes in average fuel prices from 4.71ghs in December 2020 to GH¢6.33 in July 2021 showing 34% increase of average fuel prices.
Despite the fact that the National Tripartite Committee (NTC) has improved the National Daily Minimum Wage to GH¢12.53, which is a 6% increment on the 2020 figure of GH¢11.82, 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 (10ghs per day by 360days) will be far realistic.
Secondly, the child education relief is granted to a resident individual who pays his or her child’s school fees. The relief is granted to a maximum of three children attending any recognized registered educational institution in Ghana. A child under this law includes an adopted child or ward. Both parents cannot claim this relief in respect of the same child /children. The relief is currently GH¢600 per Child per Year.
Previously, per the fifth schedule of the Income tax Act 2015(Act 896), in the case of an individual who is sponsoring the education of the child or ward of that individual in a recognized registered educational institution in the country, that individual is entitled to a 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 1.60ghs per day) should be further adjusted to GH¢1,200 (3.30ghs per day by 360days ) to accommodate part of the hardship in taking up responsibilities in growing up children as well as educating them.
Thirdly, Disability relief is granted to persons who prove to the satisfaction of the Commissioner-General that they are disabled. This relief is granted to disabled persons who receive income from business or employment and does not affect persons who earn income from investments.
The disability relief is the same as what pertains in the fifth schedule of the Income tax Act 2015(Act 896); 25% of the disabled person’s income from business or employment. The principle under this relief is to encourage the disabled to engage in business ventures or to be actively employed.
Fourthly, the Old Age Relief is granted to persons who are 60 years of age. The relief is GH¢1,500 per Year. Previously, per the fifth schedule of the Income tax Act 2015(Act 896), in the case of an individual who is sixty years of age and above, that individual is entitled to a personal relief of two hundred currency points or 200ghs.
I strongly support that the old age relief of GH¢1,500 per annum is rather very low as the pensioners who significantly fall 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 by 360days).
Fifthly, Aged Dependent Relative Relief is granted to a resident individual who takes care of a relative who is sixty years old and above. The relief is granted up to a maximum of two relatives. The relief does not apply to a dependent’s spouse or child. Two persons cannot claim this relief in respect of the same relative.
The relief is GH¢1,000 per Year. Previously, per the fifth schedule of the Income tax Act 2015(Act 896), in the case of an individual who has a dependent relative, other than a child or spouse, who is sixty years of age or more, that individual is entitled to a personal relief of one hundred currency points or 100ghs but that individual may only claim relief in respect of two dependent relatives.
It is strongly recommended that the 1000ghs can be further adjusted upwards to GH¢3,600 (10ghs per day by 360days) considering the burden of buying food, clothing, water, shelter and medicines for the aged dependents.
Sixthly, Educational Relief can also be granted educational relief if that person undergoes training to update his/her professional, technical or vocational skills or knowledge. The relief is GH¢2000 per year.
Previously, per the fifth schedule of the Income tax Act 2015(Act 896) in the case of an individual who has undergone training to update the professional, technical or vocational skills or knowledge of the individual, that individual is entitled to a personal relief which is equivalent to the cost of the training of not more than four hundred currency points or GH¢400.
I strongly recommend that this relief should be adjusted further to a minimum of GH¢5,000. This is because many students under the stated training should be encouraged to complete their courses for the betterment of the country.
I personally believe that, these group will further be encouraged to contribute their quota to the economy, either through the payment of taxes or improved productivity.
Finally , the Mortgage Relief, also known as the Mortgage interest relief, is a tax relief based on the amount of qualifying mortgage interest that a tax payer can pay in a given tax year for a principal private residence and this relief can be enjoyed for only one building. This relief should be applauded as it shows concern for the tax payer who has committed hugely in his or her place of abode.
According to Afrobarometer Briefing Paper No. 124 Tax Administration in Ghana: Perceived Institutional Challenges by Daniel Armah-Attoh and Mohammed Awal (December 2013), ‘the finding regarding tax unfairness or taxes being high and unaffordable is not surprising. Since 2008, government has pursued efforts aimed at improving tax revenue mobilization.
As a result, some previously untaxed products and services (communication service tax; 20% tax rate on local gin and purified water in 2010 which eventually failed when implemented; and 10% windfall profit tax on mining firms proposed in 2012 budget etc.) are now being taxed while the rates on others have been varied (e.g. the 100% increase in road tolls in 2010; increase in corporate tax rate from 25% to 35% etc.).
Somehow, citizens and corporate bodies generally view the introduction of new taxes or changes in tax rates as social punishment and an increase in economic woes’’.
The upward adjustment in the personal tax reliefs for Ghanaians will motivate tax payers to appreciate the fairness of our tax regimes.