GRA scores lowest at 17% in VAT compliance
With a compliance rate of 17 percent, the Ghana Revenue Authority (GRA) ranks lowest in percentage of Value Added Tax (VAT) contribution to total tax revenue in the West African sub-region.
Data from the GRA indicate that VAT penetration in some other countries within the ECOWAS region is far beyond the collection rate in Ghana.
The records reveal that total contribution of VAT (penetration) to total tax revenue in Benin is 40 percent; Cote d’Ivoire, 32 percent; Niger, 29 percent; Senegal, 33 percent; Sierra Leone, 25 percent; and Togo, 43 percent.
Speaking to the B&FT, Commissioner-Domestic Tax Revenue Division (DTRD) of the GRA, Edward Gyambrah, partially attributed the challenge to inadequate public awareness and education of the prosecutorial laws and sanctions which apply in the VAT regime.
“Most businesses know it is illegal not to issue VAT, but are not aware of the dire sanctions this illegality attracts – and the same for clients who refuse to take such receipts for purchases. This is why we are creating lots of awareness in our ongoing invigilation exercise to boost compliance and improve the collection rate,” Mr. Gyambrah indicated.
Section 41 of the VAT Act, 2013 (Act 870) states that a business making a taxable supply of goods and services shall issue a tax invoice and retain a copy.
Sub-section nine of the Act provides that persons who issue false tax invoices or sales receipts, or use a false tax identification number or fail to issue tax or sales invoices commit an offence and are liable on summary conviction to a fine of not more than 100 penalty units or a term of imprisonment of not less than six months.
The sub-section equally stipulates that a client’s failure to demand a VAT invoice, or a business’s failure to issue it, makes them liable on summary conviction to a fine of not more than three times the tax evaded or to a term of imprisonment of not more than five years, or both.
Fake VAT receipts in circulation
Among key infractions, the DTRD has confirmed that there are fake VAT invoices being used by unscrupulous businesses.
But Commissioner Gyambrah disclosed that buyers must be aware of such fake receipts and make informed decisions to report such acts.
“The contents of a valid VAT invoice have key features such as name, address and TIN of the taxpayer; also, date and time of the supply must be indicated as well as the invoice number. The description to identify the goods and services supplied, and their quantity, must be on the invoice – including the amount,” Mr. Gyambrah stated.
Existing challenges in the VAT regime
The GRA has admitted that it is indeed battling a number of challenges in the VAT regime, which among many include non-issuance, under-reporting and under-carding (when some businesses put cards under invoices and rewrite low amounts to the state – contradicting the price issued to clients).
Latest action to boost compliance
The Authority in a recent mystery shopping exercise arrested two Chinese businessmen for suppressing tax through non-issuance of VAT receipts. These companies, according to the DTRD, are among numerous entities which have printed and are issuing their own invoices.
Interestingly, the two companies had the VAT receipts in their lockers but were not issuing them.
Equally, owners of three local businesses – Champion Dishes, Grace Has Found Us Depot and Celeb Beverage Depot – were last Friday all arrested for failure to issue VAT invoices. Their offence contradicts VAT Act of 2013, Act (870), which makes it obligatory for business operators to issue VAT invoices and pay tax.
Call to action
Commissioner Gyambrah said citizens must support the GRA to boost compliance by reporting businesses that are not issuing VAT receipts, with purchasers also demanding VAT for transactions which attracts taxes, adding: “This is the only way to ensure Ghana will not have to go for aid”.