Barring any last minute glitch, the Ghana Revenue Authority (GRA) will on June 6 this year begin implementing a new tax compliance tool referred to as the Upfront Payment of Value Added Tax (VAT).
The upfront VAT payment, according to the GRA, is not a new tax but a compliance tool – which law was passed last year, 2022, in the VAT amendment Act (Act 1082) that requires charging an additional 12.5 percent on the Customs value of goods imported by businesses which are mandated to register for VAT but have failed to do so.
Speaking to the B&FT at a media engagement in Accra to make the announcement, Commissioner, Domestic Tax Revenue Division (DTRD) – GRA, Edward Gyambrah, said the strategy’s overall aim is to boost and augment tax revenue, as the approach is only applicable to persons mandated to register for VAT and account for it but have refused.
“The upfront VAT compliance tool is not applicable to businesses or persons who are registered for VAT and are fully compliant. These businesses are out of this strategy’s scope – this is not a new tax, it is avoidable when businesses register and are already complying with VAT,” Mr. Gyambrah disclosed.
Key stakeholders of the GRA who will be affected by the upfront VAT policy, according to Mr. Gyambrah, have already been consulted for the roll-out.
“Particularly, we’ve had engagements with GUTA, Trade Advocacy Group of Ghana, Chamber of Commerce and Industry, Association of Ghana Industries (AGI), Association of Customs House Agents, Ghana Institute of Freight Forwarders, Customs Brokers Association of Ghana etc.,” the Commissioner noted.
The policy, the Commissioner explained, is aimed at bringing parity to the pricing of goods by registered and non-registered importers to ensure fairness.
The upfront payment when made can however be recovered, when the importer registers, files returns and pays the relevant taxes.
In order to shore-up and meet this year’s tax revenue target, Mr. Gyambrah said the tax authority is embarking on a number of initiatives including amending the various tax laws; such as changes in the Income Tax Act, Excise Duty, and introducing a new levy – the Growth and Sustainability Levy, etc.
Other initiatives to shore-up and improve revenue mobilisation include the ongoing e-VAT invigilation exercise, test purchases and mystery shopping exercises by the GRA.
2023 tax target
This year, the GRA has set a revenue target of GH¢106billion – of which the Customs Division is expected to collect some GH¢28.5billion.
Despite meeting annual tax targets, GRA maintains that VAT collection has been a challenge over the years; as the country currently rakes in a little over GH¢20billion from the tax annually, data from the Finance Ministry have shown.
VAT penetration levels
Ghana’s age-long low VAT penetration and performance has been described by the GRA as inadequate among countries in the sub-region.
The country’s VAT collection and percentage of penetration, according to the tax authority, is positioned below 20 percent compared to Benin which has a penetration of over 40 percent; Cote d’Ivoire, 32 percent; Niger, 29 percent; Senegal, 33 percent; Sierra Leone, 25 percent; and Togo, 43 percent.