Interest Tax Abrogation To Cause Ghana GH¢6 Million

With the Parliament’s last week approval of the Income Tax Amendment Bill, the new Act, when signed by the President into law, will remove a recently imposed one (1) percent tax on interests earned by investors, and also cut withholding tax from 15 percent to 7.5 percent.

But, according economists this will results in huge loss or cut in expected revenue for the year.

It is estimated that, Ghana is likely to lose over GH¢6.0 million in revenue following the withdrawal of the 1% tax on interest earned on investment.

However, the Chairman of Parliament's Finance Committee, James Klutse Avedzi explains that the ministry of finance is to introduce measures in the supplementary budget to address the shortfall.

The Ministry of Finance early this year announced the withdrawal of the one percent withholding tax imposed on interest earned by individuals on any investments.

The tax imposition on interests is part of provisions in the new Income Tax Act, 2015 (Act 896) which came into force on January 1, 2016.

However, a huge public outcry over the issue after banks and financial institutions sent SMS alerts to their customers about the provision and how it would affect them forced the Finance Ministry to write to Parliament to withdraw the tax.

But Mr. Avedzi, told parliament that investors will still pay for the 1 percent tax until the amendment is legally passed.

Although, it is not clear as to when Parliament will communicate it’s decision on the new act to the President for action, but insiders say the “House is likely to act with extreme urgency in notifying the President on the matter” given the “huge public, business and investor interest in the provisions of the new legislation.”

The Ghana Revenue Authority (GRA) on January 13 2016, directed all financial institutions to stop charging the 1% withholding tax on interest earned by individuals.

However, the move by the GRA generated angered some members of parliament since in their view, the GRA could not carry out such an action without recourse to Parliament.

A Member of Parliament’s Finance Committee, Dr. Mark Asibey Yeboah argued this point out in an interview with Citi News.

“If Parliament passes a law, the president assents to it, and that is the position of the law. Even the President in his press conference was not able to send a message to Ghanaians that nobody should pay that tax; the Minister of Finance cannot say same. Now the GRA sends a directive to financial institutions to stop collecting the tax. I think it’s a not right, they shouldn’t have done that and as the law stands, they should go ahead and collect the taxes because it is only Parliament that can reverse the decision,” he insisted.