News
Domestic Revenues Set To Rise
The nation is currently in a dire debt predicament, which has stopped the government from accessing the global financial markets to borrow.
The current scenario has, among other things, prompted the government to take a variety of initiatives as part of efforts to improve domestic income mobilization in an effort to close the revenue shortfall.
The Minister of Finance announced the addition of an additional income tax band of 35% for certain income levels for residents in the 2023 budget and government economic program.
In addition to the present rate of 30%, this will raise the top marginal tax rate to 35% for residents with chargeable monthly incomes over GHC 20,000.
Additional Government Revenue
Deloitte Ghana noted in its assessment of the new tax legislation that the government had initially introduced the maximum marginal rate of 35% in August 2018 before quickly changing it to the current 30% for those earning certain amounts of income.
Personal income tax (PIT) is the government’s third-largest source of tax revenue, so a rise in the PIT rate is anticipated to assist the government raise more money, according to the accounting and auditing firm.
Flip Side
As beneficial as the new policy may be for the government, it also has drawbacks.
For instance, the tax rate increase will, all other things being equal, result in a decrease in resident individual employees’ net salary and disposable income within the designated income group.
Once more, those who are self-employed, such as small business owners, and whose chargeable income (taxable income) is within the designated income tax band, will experience a rise in their tax costs, which will diminish their net profit after tax.
Interestingly, Deloitte claims that even if the Budget Statement does not mention it, there might be a similar hike for non-residents given that this has typically been the case. The PIT rate for non-residents is now 25%.
The cost of hiring high-income local or overseas workers may also go up for employers.
Conclusion
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