Question

QU ESTION TWO
A. Explain any four (4) key functions of taxation in the Ghanaian Economy.
B. Outline any four (4) benefits of withholding taxes.
C. What is income in the context of Act 896? Distinguish between assessable and chargeable incomes.
D. Outline any ten (10) incomes that are exempted from tax under the Income Tax Act 896 of 2015
.
E. Explain the conditions under which corporate expenditure would be allowable for tax purposes under the act 896 of 2015.
TOTAL – 20 MARKS

Answer 1

A.) Key functions of taxation in the Ghanaian Economy :
- An individual is deemed resident for a year of assessment if that individual is a citizen of Ghana (other than one with a permanent residence outside Ghana for the whole year of assessment).

- Present in Ghana for a period, or periods amounting in total to 183 days or more in any 12-month period that commences or ends during the year of assessment.

- It is the employer’s responsibility to file monthly tax returns on behalf of its employees. The employer is required to withhold the employees’ taxes and pay to the Ghana Revenue Authority (GRA). The tax withheld must be filed and payment made by the 15th of the month following the month in which the tax is withheld.

- Additionally, the employer shall, not later than 30 April following the end of every year of assessment, furnish an Employer’s Annual Tax Deduction Schedule which shall specify tax withheld in respect of each employee employed by the employer who derives assessable income for the year from the employment. The return is required to outline salaries paid to each employee, exemptions, tax reliefs, chargeable income, tax due and tax paid.

- Year end 31 December

B.) Benefits of withholding taxes

- Tax withholding enables the government to get a steady stream of income throughout the year, as employers and self-employed people generally remit tax on a quarterly basis.

- It makes it less likely that people would spend too much money and be unable to pay their taxes.

- It also means fewer people can deliberately evade tax, since the money is taken directly out of their paychecks.

- If you have too much withheld, you may receive a huge tax refund