The take home salaries of workers in the formal sector is expected to dip with effect from this month, following an order from the Internal Revenue Service (IRS) for employers who have started implementing the 2010 salary tax threshold to revert to the 2006 regime. According to a source at the Ministry of Finance and Economic Planning, the new tax schedule for 2010 is still with Parliament and that until it was passed it would be illegal for any employer to implement it. In a quick reaction, the Deputy General Secretary of the Trades Union Congress (TUC), Dr Yaw Baah, and the Executive Secretary of the Ghana Employers Association (GEA), Mr Alex Frimpong, called on the Ministry of Finance and Economic Planning to speed up the process to enable Parliament to amend the Internal Revenue Act 2006 to admit the revised taxable threshold. Organised labour and the Ghana Employers Association (GEA), as part of their proposals at the meeting drew attention to the rising level of incomes, against difficult economic realities, which necessitated an upward shift in the minimum taxable income. The last time the threshold was revised was in 2006, when the first GH¢240 of workers' annual income was tax exempt, which meant that GH¢20 a month was tax exempt. At the time, the minimum wage stood at GH¢1.60 (¢16,000) a day. In 2010, the minimum wage stands at GH¢3.11 a day which meant that not all workers' and their minimum wage exempted from tax. To provide for equity and ensure that the entire minimum wage of all workers in the country is income tax exempt, the Committee settled on raising the taxable threshold to GH¢ 1 ,008, which translated into GH¢80 which would not be taxed for every month. However, although the Appropriation Bill which authorises the execution of the budget and the disbursement of funds, the IRS Act has still not been amended to accommodate the cushioning provision of exempting workers' minimum wage from tax. Dr Baah, who is also a labour economist, said the situation called for an urgent move by the Ministry of Finance to push for the amendment and implementation of the revised threshold to free more disposal income to workers. "We understand that it is Parliament that passes laws, but we expected that the government will pass on the amendments to Parliament soon after the negotiations but this has not been done," Dr Baah stated. He stressed that the government, represented by the finance ministry should have taken the issue seriously since it was made public through the joint communiqué announcing the minimum wage in January 2010. Since the announcement, some companies have been using the new threshold of GH¢ 1,008 as non taxable, instead of the GH¢240 as the IRS law indicates. This stance reduced the tax component that workers had to pay, while leaving them with more money in their pockets. But on May 6, the Internal Revenue Service (IRS) charged with the collection of income taxes, announced that it did not recognise tax computation that used GH¢ 1,008 as a threshold, since the 2006 Act had still not been amended. This means that workers who enjoyed the enhanced disposal income, will from the end of May part with greater portions of their incomes as tax to the government. Mr Frimpong, who associated himself with calls on the Finance Minister to speed up work on amending the Act, added that the issue would be tabled at the Tripartite Committee's next meeting, which would be due in about a fortnight. "There is the need for the Committee to meet to urge the ministry to facilitate the amendment of the law as it will enhance workers' income,” Mr Frimpong told the Graphic Business. A lot of considerations are given and assumptions set out before setting the minimum wage. Some of these factors include affordability, potential impact on employment and revenues, investment attraction and the overall prevailing socio-economic conditions in the country. Mr Frimpong explained that when those were considered, taxation was the other tool which could be used to enhance the take home pay of workers. Both Dr Baah and Mr Frimpong concurred that the IRS was only enforcing the law, which had not been amended and therefore could not allow for the enforcement of a new fiscal regime contrary to the dictates of the law. The GEA executive secretary, however, said a lot of cooperation and collaboration was needed in making all taxpayers adhere to the law, saying sometimes there was lack of uniform interpretation of the law, as the head office, regional and district IRS offices issued conflicting instructions based on their understanding of the law. Finance Ministry sources told the Graphic Business that the proposed amendments to the Act were already before Parliament's Select Committee on Finance, which would look at them and pass to the floor of the house. The source said the government was committed to raising the threshold that was why an indication was given in the 2010 budget for action, adding that the law would be amended when Parliament resumed sitting. According to the IRS, "it has come to the notice of the Commissioner of the Internal Revenue Service that a printed Legislative Instrument (L.I) with gazette number notification dated March 1 2, 2010 on the 2010 tax rates for individuals is circulating round and certain individuals are using the said L.I on personal income tax rates which is different from the one passed by Parliament in 2006 for the computation of taxes of the self-employed and employees. The new development will leave workers in limbo because the IRS has directed the general public, especially employers, paymasters, accountants, tax practitioners and consultants to ignore the said L.I and continue using the current rates until the new rates are passed by Parliament. The Tripartite Committee in January 2010 approved a proposal tabled by organised labour and employers for a review of the taxable threshold of workers' income to give them more disposable income but this according to the IRS is yet to take effect. Source: Graphic Business/Ghana