• Act 896 requires that income for tax purposes is determined separately. Under section 17 of Act 896, businesses are required to determine business income and investment loss separately and so is business income that is subject to a higher tax rate from losses on a lower tax rate if it were a profit would have been taxed at a lower rate.
• In the case of losses from a lower rate if it were a profit will be taxed at lower rate, should be carried forward and deducted from income on the lower rate and should not be used to offset against income/profit from that which should be taxed at a higher rate.
• Export of non-traditional products is taxed at the rate of 8% whereas the local sales shall be taxed at the rate of 25%. Losses on the exports of non-traditional products shall be carried forward against income in the same exports.
• The effect of this is that, taxes on the higher rate will be reduced when the loss on the lower rate is applied. This will lead to loss in revenue.
  

long-term contract means a contract:

• for manufacture, installation or construction or, in relation to each, the performance of related services; and
• which is not completed within 12 months of the date on which work under the contract commences.
  

• Amounts to be included or deducted in calculating the person’s income that relate to a long-term contract are taken into account on the basis of the percentage of the contract completed during each basis period.
• The percentage of completion is determined by comparing the total expenses allocated to the contract and incurred before the end of a basis period with the estimated total contract expenses as determined at the time of commencement of the contract.
• The Commissioner-General may allow any unrelieved loss to be carried back and treated as an unrelieved loss of an earlier basis period. The amount carried back is limited to the profit (if any) from the contract for the basis period to which the loss is carried back.
• The above rule applies where a long-term contract is completed and the person has an unrelieved loss attributable to that contract for the basis period in which the contract ended or any earlier basis period.
• An unrelieved loss of a business for a basis period is attributable to a long-term contract to the extent that there is a loss from the contract for the period.
• A profit or a loss from a long-term contract for a basis period is determined by comparing amounts included in income under the contract with deductions under the contract for that period.               ( Any 4 points)
  

• Where an employer makes a payment for overtime work to a qualifying junior employee during a year of assessment, the employer shall:
• Withhold tax from the total of the payment at the rate of five percent, if the amount paid does not exceed fifty percent of the basic salary of the employee for the month.
• Withhold tax from the excess of that payment at the rate of ten percent, if the amount paid exceeds fifty percent of the basic salary of the employee for that month.
• Where an employer makes a payment for overtime to an employee who is not a qualifying junior employee, the payment shall be included in calculating the income of that employee from the employment and taxed in accordance with the First Schedule of the Act (i.e. using the graduated rates).
• Tax withheld is a final tax on the overtime and the payment shall not be included in calculating income derived by the employee from that employment; and the tax paid by withholding satisfies the tax liability of the employee with respect to the payment and may not be reduced by any tax credits allowed to the employee.
  

• Where an employer pays a bonus to an employee during a year of assessment, the employer shall:
• If the total of the bonus payments made by that employer to the employee during the year of assessment does not exceed fifteen percent of the annual basic salary of that employee, withhold tax from the gross amount of the payment at the rate of five percent; or
• If the total bonus payments made by the employer to the employee during the year exceeds fifteen percent of the annual basic salary of that employee.
• Add the excess payments to the employment income of that employee for that year; and
• Withhold tax from the total amount obtained in accordance with the First Schedule of the Act (i.e. using the graduated rates).
• Tax withheld is a final tax on the bonus payment and the payment shall not be included in calculating income derived by the employee from that employment; and the tax paid by withholding satisfies the tax liability of the employee with respect to the payment and may not be reduced by any tax credits allowed to the employee.
  

Where a person makes payment to a casual worker, which payments shall be treated as income earned by that casual worker, and the person shall withhold tax from the gross income paid to the casual worker at the rate of five percent. Tax withheld shall be treated as final tax.

Where a person makes payment to a temporary worker as defined under section 78 of the Labour Act, 2003 (Act 651) that payment shall be treated as income earned by the temporary worker, and the person shall withhold tax from that income in accordance with section 114 of the Income Tax Act, 2015 (Act 896) as amended and the First Schedule of the Act (i.e. using the graduated rates).

Under section 22 of the internal Revenue Act 2000, Act 592 as amended by Act 2002 Act 622, Act 2006 Act 700, and Act 2007 Act 731, there shall be deducted losses of the previous five years incurred by that person on that business.    (1 Mark)
The loss shall be deducted in the order in which they occur.
Persons that can carry their losses are as follows:
i. Farming business
ii. Mining business
iii. Information Technology Business (ICT –Software development)
iv. Tourism business registered with the Ghana Tourism Authority
v. Agro-processing companies
vi. Manufacturing mainly for exports
vii. A loss incurred by a qualifying venture capital financing company from the disposal of shares in any venture investment under section 17 of the Venture Capital Trust Fund Act, 2004 (Act 684)
viii. In the case of the petroleum upstream Contractors, they are permitted to carry over their losses indefinitely
(6 Marks for any 6 points)

In conclusion, it is not all persons that are allowed to carry over their losses
The statement by the Chief Executive Officer can therefore be supported by the provision of the law as the Company is into the production of the Alata Soap which is covered under the carryover of loss provision under section 22 of the Internal Revenue Act 2000 Act 592 as amended. Any effort put in by LOBILO Company Limited to enjoy the benefit on the carryover of losses can be sustained.         (2 Marks)