- 20 Marks
Question
A) Akom Bepu has many business entities across the world especially in the tax havens, but he is based in Australia. In a recent visit to Bermuda, one of the tax havens, he met an old school mate, Efi Salakpo, who is a tax consultant and an expert in strategic tax planning in Ghana. Efi Salakpo encouraged Akom Bepu to take advantage of the stable investment climate in Ghana to set up businesses in Ghana in order to add to his immense wealth.
Efi Salakpo informed Akom Bepu that in Ghana an investor’s choice of the form of business organization, has impact on the tax exposure of the investment. This information was not clear to Akom Bepu and wanted further explanation to enable him to decide on the type of business entity to choose.
Required: As an expert in strategic tax planning, discuss the THREE forms of business organizations and the tax exposures associated with each of them to enable Akom Bepu make an informed decision.
B) Some economic experts in Ghana have argued that economic policy makers can still use
public debt as opposed to taxation to stabilize the fragile economy of Ghana. Their stand is based on the premise that it is becoming practically difficult to use taxation as a stabilization tool and a major source of government revenue to cater for development expenditure in view of the ever-growing government’s recurrent expenditure.
Required: How can the government of Ghana use public debt to stabilize the economy?
Answer
A)
The three forms of business organizations in Ghana are sole proprietorship, partnership, and limited liability company. Sole Proprietorship:
- It is owned and managed by one person.
- The owner is personally liable for all debts and obligations.
- Tax exposure: Profits are taxed as personal income of the owner at progressive rates. No separate corporate tax. Owner can deduct business expenses. Subject to VAT if turnover exceeds threshold.
Partnership:
- Owned by two or more persons who share profits and losses.
- Partners are jointly and severally liable.
- Tax exposure: Partnership itself not taxed; profits allocated to partners and taxed at personal income rates. Partnership files informational return. Partners pay tax on their share. Subject to VAT if applicable.
Limited Liability Company:
- Separate legal entity from owners.
- Owners’ liability limited to investment.
- Tax exposure: Subject to corporate income tax at 25% on profits. Dividends distributed to shareholders subject to withholding tax. Can carry forward losses. Subject to VAT, and other corporate obligations like annual returns.
These forms affect tax liability, with companies offering more tax planning opportunities like deductions and incentives, but higher compliance costs.
B) The government can use public debt to:
- Finance infrastructure projects that stimulate economic growth and create jobs.
- Fund budget deficits during economic downturns to maintain spending.
- Invest in education and health to build human capital.
- Manage inflation by borrowing instead of printing money.
- Attract foreign investment through bonds, leading to technology transfer and development.
- Topic: Tax planning
- Series: NOV 2025
- Uploader: Samuel Duah