The 2022 Auditor-General’s report has revealed a total amount of GH¢1,350,066.13 was paid as leave allowance without tax deductions resulting in unpaid taxes of GH¢101,254.96. (GH¢1,350,066.13*7.5%) by the National Lottery Authority (NLA).
According to the report, a review of allowances paid disclosed that 10% of employees’ annual salary is paid to each staff as leave allowance without appropriate tax deductions.
Section 4 of the Income Tax Act, 2015 (Act 896) provides among other things that, the income of an individual from an employment for a year of assessment is the gains and profits of that individual from the employment for the year or a part of the year, and hence a person who is ascertaining the profits and gains of an individual from an employment for a year of assessment or for a part of that year shall include in the calculation, an amount specified in respect of salary, wages, leave pay, fees, commissions, and gratuities.
A practice note issued by GRA indicates that any salary received by an employee while on leave as part of the employee income is taxable.
Allowances are taxable and be either consolidated into employees’ emoluments to be taxed appropriately or 7.5% must be deducted as tax. Employees who qualify for leave are entitled to one-month basic salary as leave allowance and this allowance is taxable.
The A- G said the infraction could result in penalties being imposed by Ghana Revenue Authority.
“We recommended that the Authority should pay the taxes of GH¢101,254.96 to Ghana Revenue Authority and provide evidence of payment for audit verification. We also recommended Management to ensure that all allowances and benefits are consolidated into staff salaries and taxed appropriately,” the AG recommended in its report.