Parliament has approved the withdrawal of the one percent withholding tax on investment earned by individuals under the Income Amendment Bill presented to it by the Finance Minister Seth Terkper.
The government submitted proposals to parliament to repel the law following public backlash after banks sent out text messages to customers informing them about the new law.
The repel of the one percent withholding tax is likely to cost the country six million Ghana cedis.
However, Chairman of Parliament's Finance Committee James Klutse Avedzi said the ministry will introduce measures in the supplementary budget to address the shortfall.
The Ghana Revenue Authority (GRA) unilaterally announced the suspension of the 1% withholding tax in a press statement even before the finance minister went to parliament.
However, the ranking Member of Parliament for Old Tafo Dr. Anthony Osei Akoto questioned the basis on which the GRA suspended the 1% withholding tax, accusing it of being in comtempt of Parliament.
The ranking member of parliament's Finance Committee told Accra based Class Fm in an interview that nobody can change a law passed by parliament, and that if anyone wants to make amendments to a law, they must come to parliament.
“A law is a law and nobody, except parliament, can amend it,” he said. "In essence, the GRA is in contempt of Parliament."
Government backtracked on the one percent withholding tax three days after it came into effect. A statement by the finance ministry said that the government had taken note of the concerns of taxpayers and the general public on some provisions of the Act, particularly those relating to withholding tax on the provision of services and the payment of tax on interests paid to individuals.
“On the issue of the imposition of a 1% tax on interest earned by individuals, Government has already submitted proposals to Parliament to reverse the position,” the statement said.
The essence of the withholding tax regime on services is to improve tax compliance. It is not a final tax but a payment on account. Therefore, the increase in withholding tax on services to 15 per cent is to encourage taxpayers to file their returns, after which they will be entitled to a credit for the amount withheld,” the statement explained further
Despite the decision by parliament to amend the law, the president must sign the Income Amendment Bill before it can be operationalised.