Question

1. Mr Derrick Asumadu Danso has been in employment at KNUST IDL ACF Limited since 1^st April 2014 as Financial Controller on a salary scale of GH¢ 12,000 × GH¢ 6,000.00 – GH¢ 60,000.

His service conditions include the following:

1. Provision of a well-furnished bungalow in respect of which he pays GH¢100 per month as rent by way of deduction at source.
2. Provision of a Land Cruiser Prado Vehicle with driver and fuel for both official and private purposes
3. Special retirement package by way of a provident fund of which he contributes 7% of his basic salary, while the company tops it up with 8.5%.
4. Social Security & National Insurance Trust contribution of 7%

His Returns submitted to Ghana Revenue Authority (GRA) on 16^th March, 2018 in respect of 2017 Year of Assessment show the following unconsolidated allowances and benefits:

5. Responsibility allowance of GH¢800 per month for which the company pays him cash.
6. Utilities allowance per annum, GH¢2,400
7. Risk allowance of 15% on basic salary and car maintenance allowance of GH¢1,200 for the year.
8. Leave allowance of GH¢1,800 per annum.
9. Watchman and a garden boy on salary of GH¢300 and GH¢350 per month respectively.
10. Medical allowance per year GH¢2,400.
11. Meals allowance of GH¢550 per month.
12. Two house helps on GH¢380 wages per month. The amount is paid to Mr. Danso in cash directly by the company.
13. Bonus of 40% of annual basic salary.
14. Monthly Overtime allowance of GH¢140
15. Unaccountable Entertainment allowance of GH¢800 a year.

Additional Information

16. On 1^st January, 2017 he was given a car loan of GH¢ 10,000 to purchase a car for his wife at a simple interest rate of 15.0% per annum. The institution gives similar facility to any other customer at the rate of 28% but the statutory rate (Bank of Ghana Rate) is 25.0%. The loan is to be paid within the period of 24 months.
17. He is married with five (5) children, three (3) of whom are in SHS, the rest are working.
18. He is also responsible for the upkeep of four (4) aged relatives of his.
19. He is currently pursuing a Master of Science degree in Accounting at KNUST where he incurred GH¢ 13,000 by way of educational expenses in 2017
20. He withdrew GH¢ 10,500 from his provident fund to buy a house in Kumasi in 2017
21. His December, 2017 salary was paid on 2^nd January 2018. However all allowances which are unconsolidated were paid in full during 2017 except those tied to the basic salary.

Required

1. Calculate his chargeable income for the 2017 Year of Assessment
2. Compute his tax liability for 2017 Year of Assessment

Answer 1

a.

These are the types of income that are taxable:

• Business or profession
• Employment
• Dividends
• Interests (except bank deposit interests)
• Discounts
• Rent collected
• Royalties
• Premiums
• Pensions
• Annuities
• Perquisites, which includes bill claims, company credit cards, loans from the company, sponsored club memberships, sponsored child tuition fee, personal driver and any benefits offered by your employer that could be converted into cash.

Chargeable Income:

Salary:60,000-5,100-4,800=50,100

Utilities allowance per annum=2,400

Car maintenance:1,200

Risk allowance:9,000

Leave allowance:1,800

Watchman and a garden boy on salary: 3,600 and 4,200

Medical allowance;2,400

Meals allowance of :6,600.

Two house helps: 9,120

Bonus of 40% of annual basic salary.24,000

Monthly Overtime allowance: 1,680

Unaccountable Entertainment allowance:800

Interest on loan:1,500

Loan:1,00,000

Educational expenses:13,000

Provident Fund:10,500

Adding and Subtracting all these according to provison and multiplying it by the tax rate we'll gte the tax liability.