Income tax in Ghana begun
in the then Gold Coast by the Income Tax Ordinance 1943 (Ordinance No. 1943).
However, this Ordinance has been amended several times. The Consolidated Edition
was first amended in 1961 by Act 68, followed by Acts 178 and 197 in 1963. This
was followed by the Income Tax Decree in 1966 – No. 78 and the Income Tax Decree
– SMCD in 1975.
Section 71 of the Income Tax Decree 1975 provides for a Commissioner who is responsible for the assessment and collection of income tax.
There are two main types of taxes in Ghana, the direct and the indirect tax.
The Ghana Customs, Excise and Preventive Service (CEPS) is the state organisation responsible for the collection of taxes levied on imports, exports and some locally manufactured goods, known as the indirect tax. Indirect tax is imposed on expenditure. After incomes and earnings have been taxed, government again taxes on what we spend. Thus indirect taxes are taxes on goods and services. Some indirect taxes are the Value Added Tax (VAT).
Direct tax, however, is administered by the Internal Revenue Service. This is the class of taxes levied on incomes and earnings. These are paid as corporate income tax on the profits of corporations, companies, and all people who earn an income. It is a serious breach of law for anyone to fail to pay the due tax correctly and on time.
VALUE ADDED TAX (VAT)
Under the VAT Act 1998, Act 546, VAT is a general tax on consumption expenditure. It replaced the sales and service tax, import duties, export duties and domestic indirect tax and is paid by the final consumer. VAT, has now been increased to 12.5% from the 10% on goods and services.
Aside this, there are reliefs under tax. These are life insurance, social security and pension fund, children’s education and personal relief among others.
Tax is mainly determined by how much a company makes or the individual earns. It also depends on the size of the company and the type of business Tax is also charged on imports.