The 2023 Re-Introduction Of 10% Withholding Tax
Par. 458 of the 2023 Budget Statement provided as follows:
“Mr. Speaker, stakeholder engagements for the review of taxation on betting and gambling, and other games of chance, which commenced in 2021, were concluded.”
A tax on Gross Gaming Revenue will replace Corporate Income Tax and VAT in 2023, and a token withholding tax on winnings will be introduced”. The Income Tax (Amendment) Act, 2023 (Act 1094) was then passed to re-introduce 10% withholding tax on lottery.
Why Was Withholding Tax Used To Collect The Tax On Lotteries?
Withholding tax is globally recognized as an efficient method for collecting taxes on investment income, as it enables tax authorities to capture revenue directly at source. This ensures full compliance with tax laws and reduces administrative burdens on both taxpayers and tax authorities.
Rather than allowing the taxpayer to self-declare the income from the investment, the person making the payment deducts the tax upfront. It is familiar with investment incomes such as dividends and lottery winnings. In many jurisdictions, including Ghana, this system often operates as a final withholding tax, meaning the amount withheld at the source fully satisfies the tax liability on that income, and the recipient bears no further filing obligation to the tax authorities.
Ghana’s Income Tax Act, 2015 (Act 896), reflects this international best practice. Under Section 115, the Act imposes withholding tax on specified investment incomes and under Section 119, it classifies most of this income, including dividends and notably, lottery winnings, as final withholding payments. At best, this approach ensures that windfall incomes, such as lottery winnings, which have a high rate of evasion and non-compliance with self-declaration, are taxed fully and immediately at source through deduction, with the net amount paid to the person.
The 2025 Abolishing Of Withholding On Lottery
Paragraph 258 of the 2025 Budget statement provided as follows: “Mr. Speaker: (i) we will abolish the 10% withholding tax (WHT) on winnings from lottery, otherwise known as the ‘Betting Tax.’
The Income Tax (Amendment) Act, 2025 (Act 1129) was passed to amend Section 6 of Act 896, excluding winnings from lotteries from the items that must be included in calculating investment tax.
Has It Been Properly Abolished? A call for clarification of technical issues
I think, with all intents and purposes, both the 2017 repeal and the 2025 repeal aimed to exempt income from betting, but there could be some issues with the way the law was drafted. It should have been placed under “Exempt Amounts,” which means the income is not taxable at all. From a tax policy perspective, an income is either taxable or exempt. If it is taxable, it comes as either as employment income, business income, or investment income. Section 133 of Act 896 defines exempt amount: “exempt amount means an amount exempt under Section 7, 57, 59, or 111, or the Sixth Schedule”.
From the historical account of taxing lottery winnings, parliament have deleted lottery winnings as an item of investment income by amending Section 6. It technically means that parliament categorically does not state that the income is exempt, but only providing that it is not part of investment income after its deletion.
If it is not investment income under Section 6 following deletion and it is also not exempt under Section 7, then what is the nature of the income from a lottery win?
My view is that the repeal primarily abolished the obligation on lottery operators to deduct withholding tax at the source from lottery winnings. It does not inherently exempt lottery income from taxation under the Income Tax Act 2015 (Act 896).
Under Act 896, lottery or betting income could still potentially fall within the definition of taxable income, either as business income (if the individual regularly participates in betting activities as a business or trade) or as income from isolated transactions.
If an individual’s betting activities constitute a consistent and organized trade or business, the income derived from such betting may still be taxable as business income under section 5 of Act 896. Even if winnings are occasional or isolated, they may still be subject to tax assessment. This is more so when section 133 defines business as follows:
“Business” (a) includes (i) a trade, profession, vocation or isolated arrangement with a business character; and (ii) a past, present or prospective business; but (b) excludes an employment”
Thus, while the withholding tax aspect has been repealed, it does not automatically exempt betting or lottery winnings from being taxed altogether.
Conclusion
Parliament should clearly distinguish between abolishing the withholding tax mechanism and exempting the underlying income from taxation. From a tax law perspective, unless specific exemptions are provided in the repealing legislation or explicitly amended in the Income Tax Act, 2015 (Act 896), lottery winnings are considered taxable income, not subject to withholding tax, but rather to other income tax. Winners must declare and pay the appropriate tax under existing provisions of the law. Failure to do so will amount to tax evasion. It is therefore crucial that the parliament examines the repealing legislation closely to confirm if the repeal explicitly exempts betting income entirely or merely eliminates withholding tax responsibilities, leaving the broader income tax obligations intact.
My concluding question is, does the repeal also mean that a professional gambler engaged in the gambling business of betting is exempt from tax? What about those who hit a jackpot? What about other forms of TV shows and Promotional winnings?
By: Francis Timore Boi Esq [ftimoregh@gmail.com]
The writer is a Tax Consultant and a member of the Chartered Institute of Taxation Ghana.