We are treated like criminals under the VAT regime

Some traders are urging the government to amend the Value Added Tax (VAT) law to smooth its implementation across the country.

According to the Ghana Revenue Authority (GRA), the VAT Act prescribes a value added tax on the supply of goods and services into the country, excluding exempt items, and on the importation of goods and services.

VAT is imposed on taxable supplies made by taxable persons in the course of their taxable activities, and on imported goods under the laws and regulations applicable to customs duties and other import taxes, with appropriate amendments.

Traders recognize the legal support of the VAT law and express their willingness to comply with it. However, they argue that the current implementation poses significant challenges and places merchants in a negative light to consumers.

A concerned trader, who preferred to remain anonymous, stressed in an exclusive interview that the VAT implementation is undermining business growth efforts.

He criticized the GRA’s aggressive enforcement tactics, which hold back business diversification.

The trader highlighted specific problems in the hardware distribution sector, where VAT implementation resembles double taxation.

Explaining the double taxation situation, he added that the retailer goes to the factory and pays all the duties and VAT, which he complies with without any problem and increases the cost of the item.

Then, according to current law, he is obliged to add the same levies and VAT again so that the consumer can pay them.

The consumer can choose to go to the unregistered retailer or the 4% retailer or the 18.5% retailer, and all rational consumers will be happy to buy at a low cost.

He explained that in local parlance, VAT is referred to as “Fabi Tuudo Ma Aban,” which means “addition to the price for the government.”

He questioned why businesses should be fined for not collecting VAT when they cannot pass it on to consumers, who often choose to buy from distributors who are not VAT registered.

He pointed out that many companies end up using their profits to pay VAT because consumers prefer to buy from suppliers who do not charge VAT.

The GRA’s compliance measures, which involve armed police and camera crews, worsen the situation, leaving entrepreneurs feeling criminalized.

The trader proposed to integrate VAT into the factory price of goods, eliminating the opportunity for consumers to buy from unregistered dealers.

This would guarantee uniform prices for all distributors and prevent VAT avoidance.

He also highlighted the cumbersome nature of VAT calculations, which discourages compliance.

For example, a good sold at factory level for GHS199 inclusive of VAT may be sold at GHS124 inclusive of VAT by distributors with turnover below GHS500,000, and at GHS142 by distributors above the threshold.

This discrepancy allows buyers to choose cheaper options, often from unregistered dealers.

The trader suggested that including VAT in the product price, so that all distributors could sell at the same price, would solve these problems.

He cited the example of varying cement prices due to the current VAT implementation system.

By tackling these challenges, traders believe the VAT system can be made more efficient and fair, benefiting both businesses and the economy as a whole.