Corporate entities that expect government to abolish withholding tax in the 2010 budget should hold on because government is not able to remove the tax any time soon. Deputy Minister of Finance and Economic Planning, Mr. Seth Tekpeh, indicated this in Accra last week during the pre-budget forum organised by PricewaterhouseCoopers to collate private sector inputs for the 201 0 budget. The Deputy Minister said government would need the proceeds to keep government business running, and the policy cannot be extended to only large taxpayers as is being suggested by some amongst the private sector because not all large taxpayers duly file their returns at the end of the year. Every corporate organisation liable to pay corporate income tax to government is also required to withhold five percent of the value of services rendered from time to time as withholding tax. It is an arrangement put in place to enable government to raise money to run its affairs during the year. Government, however, must refund all withholding taxes collected at the end of the year. The problem, however, is that government has difficulty with returning these monies to the respective companies from whom they were collected as withholding tax, locking up what happens to be a major source of capital for most of the companies when a new year turns. Even though companies are allowed to set off withholding tax proceeds against annual corporate taxes paid to government when filing returns, the problem arises when withholding tax proceeds exceed annual corporate tax returns. Mr. Tekpeh however assured that government will work on the problem of VAT refund, which is critical mostly for supporting companies. Similar to the withholding tax problem, companies sometimes return more to government as VAT than they actually charged on values created during the financial year, but government does not readily refund these funds. Usually, the VAT Service demands an audit to establish the veracity of the companies' claims - which could take more than six months to conclude. The private sector participants at the forum also raised concerns over the cumbersome procedures of the customs valuation system. "There are different valuation systems practiced by the GCNet - the Inspectors - before the Commissioner. We want these three streamlined and the current three to four week time period taken for one valuation report to be prepared to be reduced drastically," importers at the forum said. Mr. George Kwatia, a Director of PricewaterhouseCoopers recounted some past inputs into the budget that are still issues of concern. One is for banks to deduct provision for bad debts before declaring corporate tax. Another is the outstanding review of Legislative Instruments (LIs) on the Minerals and Mining Law 2006 to reduce minerals royalty from between three and 10 percent to between three and six percent. Having reviewed upward the minimum wage that is non-taxable, Mr. Kwatia said it is necessary for government to also review the tax band on personal incomes to reflect the change in the base. Mr. Tekpeh responded that the revenue authority reform and the governance project, when implemented, will help to streamline lapses in the revenue administration and public financial management system. He said the reforms that will be captured in the 2010 budget will see the establishment of a Ghana Revenue Authority (GRA), an integrated regime of all revenue agencies. "The efficiency we expect under this regime draws on three major pillars customs revenue, domestic revenue and then government services on the back of the e-governance project," Mr. Tekpeh explained. Source: B&FT