Introduction

Direct taxation through the ages has never been popular under any civilization and it is, not surprising that its introduction into the Gold Coast now Ghana in the form of poll tax by the white colonialists brought a lot of public resentment and disturbances.

When the British took over the Danish forts and trading posts in 1850, they thought they could meet the cost of administering the territories by imposing Custom Duties.  But the Dutch who owned settlements adjacent to the British territories refused to co-operate.  Realizing that the scheme would be ineffective without the cooperation of the Dutch, the British decided to use direct taxation as a substitute.  A land tax was first considered but pool tax was finally decided on.

Pool Tax Introduced

Shortly after his arrival in the Gold Coast, Major Hillcalled a meeting of the Chiefs of the Western districts at Cape Coast in April, 1852, and convinced them of the need to make the natives contribute to the cost of administration.  This meeting of chiefs constituted itself into a “Legislative Assembly” with full powers to enact such laws as it shall deem fit for a better governance of those countries…” The meeting accepted Major Hill’s proposals for the imposition of poll tax in the Gold Coast

Though it was suggested in the proposals that the proceeds of the tax would be used to provide health facilities, education, roads and other amenities for the areas under British protection, it appeared one reason which won the chiefs over at Cape Coast meeting was the promise made by the governor that the chiefs would be paid stipends or allowances if they assisted in collection the tax.  Having won the co-operation of all the chiefs of the western districts, Major Hill subsequently held a similar meeting in Accra for the chiefs of the eastern districts.

He also made a journey to the southern trans-Volta districts on the same mission, but the chiefs in that area rejected his poll tax proposals.

The rate of tax agreed at the Cape Coast meeting was one shilling per head of every man, woman and child living within the British Protection areas, which had an estimated population of about 400,000.   On that basis, Major Hill expected an annual task yield of 20,000 pounds sterling.  However, the actual tax collected during the first year, august, 1852 to July 1853 was 6,656 pounds sterling.

The disturbances which followed those protest meetings led to the bombardment of Christiansburg, Teshie and Labadi by the H.M.S. Scourge.

Attempts To Re-Package Pool Tax

The British government appointed Major Ord in 18 56, to investigate complaints against the administration with special reference to poll tax.  On his recommendations, old and infirm persons and young children were exempted from tax.  The collection machinery was also later re-organized on district basis by Major Hill’s successor, Sir B. Pine, who introduced municipal corporations in 1858 and substituted house rates in the towns.  These changes, however failed to have any effect on the people’s opposition to any form of taxation, whether poll tax or property rate.  In July 1859, the people of James Town refused to pay even the newly introduced property rates.

Quite apart from the people’s opposition to payment of the poll tax, the colonial administration was faced with the problem of corruption among the official tax collectors..

Demise Of Pool Tax

Under these circumstances, the annual yield of the tax decreased gradually, and by 1862, the poll tax had died a natural death.  The first attempt to revive it was in 1877 but, the fear of general opposition compelled the administration to abandon the attempt.  The second was in1897, when Sir William Maxwell made proposals for the re-introduction of general direct taxation but he died before be could put his proposals into effect.

Attempts To Introduce Income Tax

The first serious attempt to introduce modern income tax into colonial Gold Coast was made in September, 1931, by Governor, Sir Ransford Slater, K.C.M.B.C.B.E. In that year, the government was faced with a budget deficit of £400,000 sterling.  The rest of the world was experiencing one of the worst economic slumps in history, and there was no hope of any assistance coming from the home government. 

In the circumstances, the government decided to impose income tax at the rate of six pence in the pound on all income of £40 per annum or above.  As should be expected, opposition to the governor’s proposals was vehement and unequivocal throughout the country.  Protest meetings were held at various centers against the tax and some people argued that there should be no taxation without “representation”, i.e. in parliament.  For the next twelve years no colonial government felt strong enough to consider imposing an income tax on the people of the Gold Coat When Governor Slater withdrew his tax proposals in 1931, he had to impose a tax on cocoa exports in order to accommodate the £400,000 which he had expected to collect form income tax.

Financing The Budget Deficit

In 1943, the Gold Coast once again found herself in the economic doldrums.  The price of cocoa had dwindled to less than £30 sterling per long tonne, and there was an amount of £800,000 sterling to be found to balance the budget.  The only solution to the problem lay in either a drastic cut in government expenditure on social services and amenities or imposition of Income Tax.  The Governor, Sir Allan Burns decided on the latter.

The Governor’s decision put the fate of peaceful administration in the Gold Coast again in the balance.  It would appear that in view of the earlier poll tax disturbances, the home government had for many years, exercised some measure of restraint on the Governors of this country with regard to the imposition of any form of direct Taxation.  In 1943, however, it was quite clear that the chiefs and the people of this country being anxious to develop their country were already in the process of changing their opinion about taxation.

Introduction of Income Tax

Sir Allan Burns introduced his income tax proposals in a speech delivered to the Legislative Council on 23rd February, 1943.

As part of the preparation for the implementation of the proposals, the home government seconded Mr. Walter Bliss Dare, C.B.E., a retired employee of the British Inland Revenue Board, to the colonial service as adviser on income tax to the four West African colonies namely, Nigeria, Sierra Leone, Gambia and the Gold Coast.  It was Mr. Dare who introduced the Income Tax Bill in the gold Coast legislative Council.

Income Tax Bill

In his address to the 29 members present in the Legislative Council on 23rd February 1943, His Excellency Sir Allan Burns, K.C.M.G., among other things said:

But we must face the fact that we are budgeting for a deficit and although our existing reserves permit us to do so for a time, this cannot continue indefinitely.  The only possible alternative to cutting down expenditure which can be effected only by an undesirable reduction in public services, is additional revenue from taxation.

Income Tax has been paid for some years in Nigeria and in the Gambia, and it has now been decided that the Gold Coast and Sierra Leone must follow suit.  Apart from two of the small West Indian Colonies, St. Helena Gibraltar, and Malta, the Gold Coast and Sierra Leone are the exceptions to the general rule which followed throughout the British Empire, and indeed throughout most of the civilized world.”

Income Tax Bill Debate

Protest meetings were held in some parts of the country between February and August, 1943, when the income Tax Bill was introduced in the legislative council.  The council press was accused of being hasty in praising the proposed tax measures before the chiefs and people had the chance to comment.  At a public meeting held at Cape Coast on 20th July, 1943 a unanimous resolution was passed as follows:

That although it is possible to consider income tax as one of the inevitable results of civilization, nevertheless, the prevailing world economic conditions or in the present state of the country’s finance and having regard to the current institutional standing in the British Empire, the introduction of income tax into the Gold Coast is neither opportune nor justifiable, this meeting protest against the proposed introduction or income tax into the Gold Coast.  And that the representatives of the municipal towns of the country be appraised of the terms of this resolution before it is used by the Municipal Member for Cape Coast as the basis of his protest to be made in the Legislative Council.”

The Oman Council of Ogua on 7th August 1943 and adopted the above resolution in its entirely.

In contrast, at a meeting of the Provincial Council of the Central Province held at Saltpond on Monday, the 9th day of August 1943 passed this resolution.

“This Council having resumed discussion on the Income Tax Bill by the examination of the Memorandum submitted to Government on the Bill by the standing committee of the joint provinces and the reply to the Memorandum by Government, and being convinced that only realistic approach to the question can do this country any good, reaffirms its decision in April to accept the principle of the bill on the understanding that the object of the  proposed legislation is to help in bringing about material development of the Colony.

Income Tax Bill Passed

Thus, when Mr. W.B. Dare, C.B.E., rose from his seat in the Gold Coast Legislative Council in King George the Fifth Memorial Hall (now known as old Parliament House) in Accra, on Wednesday, 18th August, 1943, to introduce the Gold Coast Income Tax taxation in the form of income tax would at last be accepted after nearly one hundred years of strong opposition.

Thus, in spite of their protest speeches, the income Tax Bill went through all stages in the Council without mishap and became law on 22nd September, 1943.

Preparation For Take-Off

The Department spent the period October 1943 to March 1944 in organizing itself administratively.  The first year of assessment commenced on 1st April 1944. A list of taxpayers was compiled from information based on the Senior Staff List for civil servants, roll of private medical practitioners and Dentists, Motor vehicle licences in Respect of transport owners, and licences for traders.

Income Tax Commissioned

During April, 1944 income tax forms 21 and 22 were issued to taxpayers.  A few were retuned completed, but a large number of them were returned by the Post Office as unclaimed.  Some of the unclaimed forms bore such amusing endorsements as “Yee No Day”, “Kick the Bucket”. (Meaning dead) “Unknown” and “gone to Abidjan”.  Most of these endorsements were later found to be false.

Actual determination of tax liability began in August 1944.  Assessments in respect of traders and companies were prepared by the Deputy Commissioner himself.  Employment cases were dealt with by senior clerks for the approval of Expatriate Assessment Officers.

Basis Period

The first year of assessment under the Gold Coast income tax administration was 1944/45 and it was for the period 1/4/44 to 31/3/45.  Assessments were raised on companies, the self-employed and employee during the first year and subsequent years as follows:

Assessment form the 3rd year was on proceeding year basis and therefore it was in respect of income earned during the period 1/4/45 to 1/3/46.

Reform In 1961

In 1961, PAYE was introduced and employees ceased to be assessed on preceding year basis.  In  the same year, the tax year was also changed from (April to March)_ to (July to June) Employees were granted a 15-month tax holiday in respect of incomes earned during the period 1/460 to 30/6/61 Companies and the self-employed did not enjoy that tax holiday.  Assessments were therefore raised as follows:

1. Companies And Self-Employed

   1960/61 Basic period (1/4/59 – 31/3/60) or
   1960/61 Basic Period (1/460 – 31/3/61

   Which ever is higher.
   1961/62 Basic Period (1/7/61).

2. Employees

   1960/61 Basic Period 1/4/59 – 31/3/60
   Tax Holiday           1/4/60 – 30/6/61
   1961/62           Basic Period 1/7/61 – 30/6/62

Reforms In 1983

The proceeding year of assessment continued until 1983 when the current year of assessment was introduced for all categories of taxpayers.  With the introduction of the Current year basis of assessment, a transitional period which covered 1st July to 31st December 1982 was introduced.  Assessments during the changeover were as follows:

1. Companies And Self-Employed

   1981/82 Basis Period 1/7/80 – 3/6/81 or
   1981/82 Basic Period 1/7/81 – 30/6/82

   Whichever is higher
   1981/82 Transitional 1/7/81 – 31/12/82

2. Employees

   1981/82 Basis Period 1/7/82 Transitional 1/7/82 – 31/12/82
   1981/82 Transitional 1/7/82 – 31/12/82

A proviso was that the transitional tax should not be less than 50% of the 1981/82 assessment.  With the enactment and cessation provisions which have existed since 1944/45 were abolished. Assessments continued to be on current year basis notwithstanding the new income tax law.

Source: Dsane & Martin Adane (IRS Ghana)