According to the World Bank's eighth Ghana Economic Update, Ghana has some of the most benevolent retirement fund tax treatments in the world, which costs the government a substantial amount of money.
Globally, it was stated that there are three main possibilities for pension tax policy.
Contributions made to retirement funds are exempt (E) from tax (T), as are any interest or gains received from them, and withdrawals made from them during retirement are also exempt (E) from tax (T).
It said that neither the payments made to retirement or pension plans nor the rewards received from them are subject to taxation in Ghana.
"Withdrawals from personal pension plans or provident funds that have accrued benefits are tax-free. Social Security and National Insurance Trust benefits are likewise free from taxes.
Ghana uses a generous EEE model as a result. Further contributions up to a maximum of 16.5% of a contributor's monthly income are tax deductible for the purposes of determining the contributor's or their employer's income, hence lowering the taxable income, it stated.
Ghana uses a generous EEE model as a result. Further contributions up to a maximum of 16.5% of a contributor's monthly income are tax deductible for the purposes of determining the contributor's or their employer's income, hence lowering the taxable income, it stated.
Employer contributions are also tax deductible.
Numerous investments are free from taxes.
Numerous investments are free from taxes.
In addition, the World Bank assessment stated that a number of investment income streams—which typically benefit affluent individuals—are excluded from taxes, which lessens the PIT regime's progressivity and efficiency.
Interest paid to an individual by financial institutions, interest earned on sovereign bonds issued by Ghana, and interest or dividends given to members of mutual funds or unit trusts that have been approved are examples of investment income that is free from taxation.
Interest paid to an individual by financial institutions, interest earned on sovereign bonds issued by Ghana, and interest or dividends given to members of mutual funds or unit trusts that have been approved are examples of investment income that is free from taxation.
Furthermore, payments from transactions made by business entities are subject to a comprehensive withholding tax regime, which simplifies tax management but also creates room for potential abuse.
For instance, rent from residential properties is subject to a lower withholding rate (8.0%) than that from commercial properties (15%).
According to them, this encourages the incorrect classification of commercial properties as residential.
According to them, this encourages the incorrect classification of commercial properties as residential.