VAT woos retailers to pay taxes

The Value Added Tax Service, (VAT) in collaboration with the Ghana Union Traders Association, (GUTA) will soon introduce a Flat Rate Scheme, (FRT), as an alternative to the invoice credit method of VAT accounting in the country. The scheme is a VAT collection or accounting mechanism that applies a marginal tax percentage representing net VAT payable on the value of taxable goods supplied. A marginal 3% of tax will be charged by FRS traders on their taxable supplies. According to the Commissioner of VAT, Mr. Anthony Minlah, the FRS is to be restricted to a specified sub-sector within the retail distribution trade sector defined by levels of business turnover. “Also the targeted sector is largely the informal trading sector of the economy.” Mr. Minlah was speaking at a Media / Small Scale Entrepreneurs dialogue on “The Impact of VAT on the Promotion of Micro and Small-Scale Enterprises, (MSEs) in Accra. The dialogue is part of the initiative by the Ghana Journalist Association (GJA) in collaboration with KAB Governance Consult, with BUSAC Fund as the lead sponsor, under the project, “Using Media to Promote Small Scale Business Concerns.” The VAT Commissioner explained that it is the consumer of goods and services that are subject to the tax, who pays the tax, but added to the original price of all taxable supplies. “The impact is to increase prices by the rate of the tax.” On the effect of VAT on cash flow, he said that VAT is collected in January are payable before the end of official working hours of the last day of February. This, he stated implies that the business holds on to VAT collected for a minimum period of one month and depending on the size of the amount it could improve the liquidity position of the business for a month. “However, the input tax is a cost to the business until the amount is recovered from the output tax.” Mr. Minlah noted that all taxes generate revenue for the government to meet recurrent expenditure. He said that creating an enabling environment of SME to be part of the engine of growth depends on inflows through taxes and loans. “It is in the absolute interest of the VAT Service to assist in the growth of businesses because they are our partners in the collection of VAT.” He disclosed that ensuring compliance in the Ghanaian environment is an ongoing challenge that requires credible strategies that are seen to protect honest taxpayers by ensuring that those who cheat are caught. This he said requires public education and a strong client focus, adding that a Client Service Charter will soon be outdoored. In Ghana, the registered person is obliged to charge 12 ½ % Vat and 2 ½ % NHIL on all taxable sales. He is also obliged to keep records of sales and purchases, invoices and VAT/NHIL charged and paid. A registered person is also obliged to submit monthly returns of sales and purchases made on VAT form 20. Section 56 of the VAT Service Law (Act 546) 1998, prescribes sanctions for businesses who fail to register as liable on summary of conviction to a fine not exceeding ¢10 million or imprisonment for a term not exceeding five years or both. Mr. Ransford Tetteh, GJA President emphasized said it is only when the citizenry pay their due that they can make demands on government. He said in spite of the fact that some people think that the Ghanaian media has its own challenges to meet, it deem it necessary to support other sectors to play their roles effectively.