Gifts like houses and motor vehicles, which some newlyweds fortunately receive from club members, colleagues or fellow churchgoers, are subject to taxation and should be taxable if the law were strictly enforced; highlighting potential gaps in compliance and regulatory oversight.
Understanding Ghana’s gift tax laws
According to the Ghana Revenue Authority (GRA), the tax payable on a gift from an investment is 25 percent for a resident Ghanaian and 30 percent for a non-resident Ghanaian. When a gift is received by an individual outside of business and employment, the recipient must submit a tax return within 21 days detailing the description, value and tax payable.
Taxable gifts include buildings, land, shares, bonds, securities, money (including foreign currency), business assets, vehicles and other valuable items. Any asset credited to an account, invested, capitalised or otherwise used for the benefit of a resident person is also considered taxable. Even non-material benefits, such as favours with monetary value, can be subject to taxation.
However, inheritances received through wills or intestacy, gifts exchanged between close family members and donations to religious organisations for public or charitable purposes are all tax-free.
Research by ILAPI
According to the Institute of Liberty and Policy Innovation (ILAPI), tax evasion and weak enforcement of gift-tax laws cost government an estimated GH₵8billion in revenue in 2017 alone.
Absence of up-to-date data
The Assistant Commissioner-Ghana Revenue Authority, Dominic Naab, revealed that due to lack of gift-tax collection no recent data exist and such revenue remains unaccounted for.
“Gifts are taxable and if we don’t get the taxes on gifts, obviously that area is not being accounted for,” he revealed.
The gift-tax evasion problem is a significant and often overlooked contributor to illicit financial flows (IFFs) in the country, which badly needs every cedi to fund social and economic development programmes.
The Cecilia Dapaah case: Weak oversight
The impact of poor enforcement was evident in the 2023 case of Cecilia Dapaah, Ghana’s former Minister of Sanitation and Water Resources. The controversy began when two of her domestic workers were arrested for allegedly stealing US$1million, €300,000 and millions of cedis from her home.
Further investigations by the Office of the Special Prosecutor (OSP) uncovered additional suspicious financial activities, including US$5million and GH¢48 million across her bank accounts. The revelations sparked public outrage, leading to her resignation on July 22, 2023.
The Office of the Special Prosecutor (OSP) later charged Dapaah with failing to declare her assets and sought to seize US$590,000 and GH¢2.73million from her home while freezing her seven bank accounts. However, a High Court in Accra dismissed an earlier application due to procedural issues. On January 25, 2024, the OSP decided to drop the cases against her and the court ordered the return of her seized funds and unfreezing of her accounts within 72 hours.
Meanwhile, the two domestic workers and five accomplices are still on trial for theft at an Accra Circuit Court. This case underscores the lack of oversight regarding large assets and financial transactions that could be classified as gifts.
The Korankye-Ankrah ‘faith cheque’ controversy
Another controversial case emerged in 2021 when Rev. Sam Korankye-Ankrah’s daughter, Naa Dromo Korankye-Ankrah, received a US$1million cheque as a wedding gift. A circulating letter showed that the GRA sought a meeting with her to determine her tax liabilities on the gift.
In response to the controversy on social media, Rev. Korankye-Ankrah clarified that the cheque was merely a ‘faith cheque’ – a symbolic gesture rather than actual money. According to him, friends who presented the cheque were making a prophetic statement… believing that one day they would be able to give such a gift.
However, the public misinterpreted this gesture, assuming the cheque represented a real financial transaction.
Speaking to his congregation, Rev. Korankye-Ankrah dismissed claims that his daughter had received an actual US$1million gift, urging the public to understand the spiritual significance behind the presentation.
He also criticised how the media framed the story, saying that headlines misrepresented the event.
Low compliance with gift-tax laws
According to Mr. Naab, gift-tax compliance remains significantly low despite being a legal requirement. He emphasised that gifts are taxable when received without an adequate reciprocation in return.
“Gift is anything that is given and in return there is no contribution or no adequate contribution; so when I give you something and you don’t reciprocate to a necessary contribution, that becomes a gift – and the law says that when you receive a gift it is taxable,” he explained.
He said the tax implications of a gift depend on its nature. Gifts related to employment are added to job income, while business-related gifts are added to business income. Otherwise, they are considered investments. Unfortunately, taxes on gifts often go unreported despite the frequent exchange of gifts.
Mr. Naab also noted the role of gift-tax evasion in fuelling illicit financial flows. He said some individuals use gifts to conceal income, placing money in minor properties or bank accounts and later claiming it as legitimate earnings.
“When it comes to illicit financial flows, as you are talking about, the fact of the matter is that certain persons receive gifts; then they put them in minor properties or find a way of putting the money in some accounts and later they store it as if it is actually their earnings – and the taxes are almost always not paid,” he revealed.
Challenges in enforcing gift-tax laws
He noted that addressing this issue is challenging in Ghana’s cash-driven economy, where tracking financial transactions remains difficult. Unlike developed countries, where digital transactions are closely monitored, Ghana’s reliance on cash makes tax evasion easier.
Mr. Naab stressed the need for both education and transparency in tax utilisation to improve compliance. He argued that many Ghanaians refuse to pay taxes because they do not see tangible benefits.
“We also need to sustain education on the fact that we need to pay taxes when we take gifts. Having said that, individuals will want to see what their taxes are being used for when they are encouraged to pay. When you don’t see what your tax is being used for, payment becomes a challenge,” he explained.
Gift-tax applies to more than just cash
Jeffery Kabutey Ocansey, Executive Director-Revenue Mobilisation Africa, noted that taxable gifts extend beyond small items to include houses, vehicles and other high-value assets.
“You might look down at the word ‘gift’ when you are looking at the downtrodden ones; like, let’s say for example, somebody gifting somebody a birthday gift. Beyond the threshold of a normal GH₵50 gift, we are now talking about people who give goods and equipment or things that are worth designating as assets,” he explained.
Mr. Ocansey pointed out that many Ghanaians are unaware of the existence of gift-tax and even those who know about it often fail to comply. He stressed the need for GRA to improve public education and create awareness about taxable gifts.
“I think GRA, on the issue of communication, should reach out to people and let them be informed of what they have to pay for, which is the gain that they are benefitting from – they need to pay taxes on it. And then also tell them how much they are supposed to pay and ensure that the mass education catches up with people,” he stated.
Strengthening enforcement and closing loopholes
To tackle these challenges, Mr. Ocansey called for a combination of policy reforms and stricter financial oversight. He suggested setting clear thresholds for tax-free gifts while monitoring suspicious transactions.
He also emphasised the role of the Financial Intelligence Centre (FIC) and Bank of Ghana in ensuring compliance.
“The laws exist, but enforcement is weak. If we take gift-tax seriously, we can close revenue gaps and curb illicit financial activities,” he concluded.
Source: thebftonline.com
