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GRA, why should FSHS beneficiaries pay more taxes?

botchway August 13, 2019

 

The Free Senior High School (FSHS) scheme, to me, is one of the most important schemes to be implemented. To think of many otherwise very intelligent people who would have dropped out of education and gone down low on the social ladder, now having the opportunity to rise to the top is a blessing from God.

What that means is that the gap between the rich or well-to-do and the poor will be narrowed, with a lot more people entering the second class category.

The other day, the Commissioner-General of Ghana Revenue Authority, Mr. Kofi Nti, came out with a forecast that beneficiaries of the FSHS will pay more taxes to the state in the future. Even though by principle this should be the case, as from my understanding, he might be referring the status of the worker who had improved upon his education by accessing Free SHS, and thus, earning a higher income.

However, in my opinion, if it is about the element of higher taxes, then that should not be the case. In fact, it should not ever be implemented.

The problem with taxes is that the heavier the tax, the more the one taxed will be reluctant to pay. It is as if Mr. Kofi Nti has settled on the fact that only those who can easily be taxed, i.e. workers on the Accountant-General’s payroll, established businesses and industries, and a few others must be saddled with achieving targeted tax revenues for the state.

This cannot be sustainable, hence, as it shows, the government falls short of revenue to implement valuable projects and policies.

If only the Ghana Revenue Authority, with backing from the government, can lower the tax rates and increase the tax net to cover everyone doing work in one form or the other, it can raise a lot more tax from people who will be so willing to pay their taxes.

For example, if the pure water sellers are given a flat tax rate of GH¢1.00 per month or bulk payment of GH¢10 a year, we can imagine the revenue that will be generated from that sector, which should include newspaper vendors, shoe-shine boys, and porters under the lowest bracket. Assuming we have one million people across board in this bracket, it will mean GH¢1 million of revenue generated every month.

The cooked food sellers, like the waakye, gari and beans, kenkey, and others can be put under, say GH¢5 a month, or GH¢50 bulk payment a year, with chop bar operators pegged at GH¢10 a month.

With such steady and regular revenue being generated, those who have been saddled with high taxes can be relieved off the burden and made to pay much lower taxes. With this, the businesses and industries can become more profitable ventures, and they will expand and employ more people. More formal workers will mean more revenue from taxes; more products being manufactured will mean more revenue from taxes; and more taxes will mean more money available to improve the living standards of the people.

The Commissioner-General should have said, with the Free Senior High School scheme a lot more taxes will be generated, because of the high human resource level in the country, people in employment will pay taxes according to their level of qualification.

Once I am here, it is worth noting to remind the GRA of an over-taxation which is in the system and robbing workers off their true pay-checks when they receive their first salary. This is more in the Accountant-General’s salary payment scheme.

For some reasons that have not been fully explained to the satisfaction of all, a newly-employed worker in the Civil Service may have to wait for six months, and sometimes to a year, before being paid. When lucky, all the salary arrears will be paid at a go. And here is why the institutionalised duping comes in. Assuming the worker is on say, GH¢1,000 a month gross salary, and the system is to tax 10% of that, one would expect that after working for say six months and not being paid, his first salary must be tax exempt.

This is not the case, but even worse. In the system, the more your salary the higher your tax rate, so if those paid GH¢6,000.00 gross salary a month are taxed 20%, it will mean their net will be GH¢4,800. The GH¢1,000 a month gross salary receiver will take home GH¢900, meaning his take home after six months should be GH¢5,400.

Reader, please do not get confused yet, we are about to get to the interesting point. After six months this worker’s first salary comes with back-pay and the system taxes him 20% instead of 10%, and he pays the state GH¢1,200 instead of GH¢600 for the six months he had worked and was not even paid.

This is very unfair and I hope the Ghana Revenue Authority could implement some tax refund for such workers, if it can’t instruct the system on how much tax should be placed on the first salary.

Ghana Revenue Authority must be up and about and lower the tax rates and spread the tax net to cover all, as is done in well-developed and prosperous countries.

Hon. Daniel Dugan

 

 

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