Article 199 of the 1992 Constitution, amended by the insertion after clause (3), and dealing with retirement and pensions, provides that: “The pension payable to any person shall be exempt from tax.” Further to this constitutional provision, Act 766 of 2008 categorically exempts pensions from taxes.


These clarifications were provided by the deputy minister of Finance, Hon. Casel Ato Forson to assure the public that, there were no such plans by the government to tax pensions.

While that is reassuring, it remains unclear as to why the Finance Minister would provoke such a needless public debate in an election year, and in the wake of public outcry over unbearable utility and fuel prices, and general worsening conditions of living.

At the Graphic Business/Stanbic Bank Business Breakfast Series on the topic, “The New Tax Law: Its Implications for the Economy and Businesses, Mr TerKper said the government had had to resort more to taxes as a source of revenue to correct the fiscal gaps.

“Perhaps we will have to exempt a certain level of income on the pension so that those who are fortunate enough to make fat pensions may pay a little tax,” Mr Terkper suggested, adding, “…remember that as you make your social security contributions, they are exempt from tax even though it is part of your income.

It is difficult to say, whether Mr Terkper spoke in the full knowledge of the constitutional provision in respect of pensions, or he spoke totally out of ignorance of the provision, which finds further expression in the Income Tax law, Act 766 of 2008. If he was aware of these constitutional and legal provisions and yet went ahead to provoke such debate, then, that can be described as an attempted political suicide, and even if he was oblivious of them, that would have been more serious and casted doubt on his knowledge and competence as a finance minister.

Finance Minister Terkper argues that, no country in history has successfully maneuvered through the kind of economic challenges Ghana finds itself, without increasing taxes; and challenged his detractors “to look at Spain, Ireland, and other countries who have done a turn-around in their fortunes and look at the instruments they used and see whether they did not use tax instruments.”

The uproar generated by the Finance Minister’s controversial views was widespread, and it came as no surprise, when the Deputy General Secretary of the ruling National Democratic Congress, Koku Anyidoho stepped into the fray to halt the obvious political damage that was unfolding as a result of the statement.

“The NDC party will not sit down again…We will not sit down again… No individual minister will walk us into opposition. No individual minister will walk us into opposition, it will not happen, it cannot happen…”, he said on Muntie FM.

But what the Public Agenda finds most intriguing is the pledge by the New Patriotic Party running mate for the 2016 elections, Dr Mahamudu Bawumia, on Friday’s edition of Graphiconline, that “a future NPP government will review the Income Tax Act 2015 to abolish the taxes on pensions and allowances.” This is the most confusing part of the whole debate that raged for days. We are not sure how Dr Bawumia and the NPP will remove taxes on pension when they don’t exist in the first place, and the constitution prohibits such taxes.

Some circumspection on what politicians say on political platforms will help make voters take them more seriously.

Source: Public Agenda


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