Dec 29, 2016, 11:37 AM
allow me space in your newspaper to add my voice to the call made by GCCI
president Muhamad Jagana for the new Gambian government to review taxes
especially the payroll tax on the Point Newspaper of Tuesday 6 June 2017. Mr
Jagana could not have said it better when he said, “This will make it possible
for people to have more disposable incomes, spend more money on their lives,
improve their quality of living and also help to gel the economy”.
These are very important considerations and I could not agree more with Mr Jagana that reviewing the payroll tax for a better regime where low income earners are not penalised for being in a low-income bracket is necessary. I want to talk a bit more about the unfair nature of the Gambian payroll tax system and I will do this looking at how employment income is taxed in the Gambia.
According to the PKF Individual Country Tax Guide 2016/17, anybody with a monthly income of D1,500 will not pay tax but any amount in excess of this will attract tax at varying levels of 5% to 30%. PKF has stated in its guide that “tax is payable on the gross employment income of an employee monthly”. However, I will disagree with this statement and I will give my reason for the disagreement a bit further in this write up.
Mr Jagana just hit the nail on the head and I think the new government should prioritise this review to ease the burden on low income earners. Living cost is very high in the Gambia and I have done a guesstimate of this for a small family of 5 living in Busumbala and the breadwinner working in Brikama.
This is just an assumption that the family lives in their own home, spends a bare minimum on basic things with school fees, clothing and medical bills excluded.
Bag of rice last 1 month = D1,200, fish money for a month = D1,500 (30 days x D50), travel cost to and from work for a month = D320 (20 days x D16), electricity = D500.
As can be seen from the above basic things, the total living cost is assumed to be D3,520. This is far more than the per capita income reported by the World Bank Group in 2014 of D1,533 per month (($460 a year x D40) / 12 months). From the above analysis, a small family needs at least D3,500 to survive at the brink of poverty. If the average income is £1,500 a month as stated by the World Bank, then poverty is the order of the day as families will not be able to look after themselves.
Coming back to the statement by PKF that tax is applied on gross monthly income, I will use the recent payslip of the Honourable Minister of Tourism which featured on the Freedom Newspaper of 5 April 2017 to argue that this is not the case. It is worth noting that I have not seen any rebuttal from the Accountant General’s department neither from the minister himself on the validity of this payslip. On that note, I hold that the payslip is genuine and valid.
On the said payslip, the minister is paid a basic salary of D29,333, Telephone Allowance of D5,000, House Rent Allowance of D5,000 and Responsibility allowance of D10,000. This gives a gross salary of D49,333.50 including a rounding of D0.50. The payslip shows a net salary of D41,567, meaning a tax deduction of D7,766.50. If we are to rely on the statement of PKF that tax is based on gross pay, then the minister’s salary will be taxed at 30% being income range above D58,000 per year. Therefore, the tax to be deducted from the minister’s salary should have been D14,800.05 but only D7,766.50 was deducted hence why I conclude that Gambia’s income tax regime is flawed and open to abuse by people in authority.
I have tried to establish the tax rate used on the minister’s salary but find myself chasing my own tail. Tax of D7,766.50 appears to be 26% of basic pay or 16% of gross pay. This is not in line with the PKF guide and the rate should have been 30% on basic or gross pay.
The government should note that the current income tax regime is flawed and open to abuse. All it takes is a clever accountant to pay himself and the senior executives lower basic salaries and increased allowances. This way, they will pay less tax and go home with pockets full of money. The poor low income earner who is not privileged to have allowances will be taxed on their meagre earnings. Have you ever wondered why the rich are getting richer and the poor getting poorer? Well, here is an example.
I am recommending to the Gambian government to raise the Personal Allowance (Tax Free Allowance) to D3,500 (basic living cost) and apply tax on gross earnings and NOT basic salaries. I know critics will say that raising Tax Free Allowance will mean less tax revenue for GRA but this will be more than compensated by the extra tax revenue to be generated from fat cat directors and high income earners.
Before anyone attacks me, please note that this write up is not aimed at any particular person and I used the Tourism minister’s payslip because it is available in the public domain. The new government needs support in highlighting some of these things which I believe some people in authority who are benefitting from them wont.
I believe the government should constitute a committee to look at all the tax regimes from personal tax to Capital Gains Tax, Dividend tax, Withholding tax etc. If there are resourcing constraints at the GRA, I am willing to collaborate with them and provide help where necessary. For those who may think that I am looking for employment, well I am not. I have worked for the likes of Lloyds Banking Group, Halifax Bank of Scotland, Skipton Building Society and currently with the fourth largest consumer retailer in the UK with an annual turnover of £16bn. I believe we all should support the government in any little way we can whether or not you are in the country.
As an example, by applying tax on gross income, tax revenue from the Tourism Minister would be £14,800 per month compared to the D7,800 being deducted. This is extra D7,000 revenue per month and apply this to all the ministers and fat cat directors, the tax revenue will be maximised and more disposable income for poor workers.
As mentioned before, this piece is not aimed at anyone but If anyone is offended by it, I make no apologies.
Thanks for the space and keep up the good work.