Withholding tax on services which was increased to 15 percent following the implementation of the new Income Tax law is to be slashed to 7.5 percent.
There has been massive outcry from business operators following the increment of the tax which prior to the implementation of the new income tax law was at 5 percent.
Tax analyst Abdallah Ali Nakyea earlier told Citi Business News the increment if not reversed will only cripple many businesses in the services sector.
‘I think that the 15 percent withholding tax on services is a very high one because I just wonder what are the margins that people in the in the services sector are making, if they attract so high a tax and a lot of them are in margins below 5 to 7 percent then of cause 15 percent eats into their capital and then of course they are likely to fold up’. He said.
But addressing questions during a media interaction at the Flagstaff House today January 12, 2016, President John Mahama said Government had already sent a proposal to parliament for the tax to be slashed by half.
‘A letter has already been sent to the Speaker of Parliament asking for an amendment of that tax, a letter was sent to the speaker even before the outcry begun asking for a reduction of the 15 percent withholding tax on services to 7.5 percent’. He told journalists.
This is not the only tax which is to be revised in the new income tax law, earlier Finance Minister Seth Terkper announced Parliament had been asked to reverse the imposition of the 1% tax on interest earned by individuals.
A statement from the Finance Minister on the matter said ‘government has already submitted proposals to Parliament to reverse the position’.
Following the implementation of the new income tax law by the Ghana Revenue Authority (GRA) to replace the repealed Internal Revenue Act, (Act 592) which took effect on 1st January, 2016, all interest paid to an individual is to attract 1 percent tax this means any interest accrued on treasury bills, fixed income deposit, interest from banks among others will attract a tax of 1 percent.
Interest or dividend paid to a member or holder of an approved unit trust or mutual fund is also taxed at one per cent where the holder is an individual.
The imposition of the tax was widely criticized while players in the investment sector warned the move could seriously affect interest in the industry which is still struggling to draw people in.