Ghana: New VAT rate of 17.5% takes effect 


10 January 2014

The new Value Added Tax (VAT) rate of 17.5 per cent has taken effect. This followed the presidential assent given to the VAT Act 2013 (Act 870) on December 30, 2013, and its subsequent gazetting the following day. Under the regime, the standard rate which was 12.5 per cent, moves up to 15 per cent, while the National Health Insurance Levy (NHIL) remains at two-and-half per cent.


Two days into the implementation, the Ghana Revenue Authority (GRA) says reports received from the field indicates that the process has been generally hitch-free.
According to the Commissioner-General of GRA, Mr George Blankson, reports from the Tema Harbour, for instance, indicated that importing companies had configured their figures and were working with the new rates.
Speaking to the Daily Graphic in Accra yesterday, Mr Blankson expressed the hope that registered companies would co-operate to ensure that the nation reaped the expected outcomes from the new rate.

Widening the tax net

One significant aspect of the new VAT rate is the widening of the tax’s scope.
Presenting the 2014 Budget statement to Parliament last November, the Minister of Finance and Economic Planning, Mr Seth Tekper, forcefully advanced arguments to support the need to extend the tax net to include many businesses that were making huge profits but which operated outside the tax net. Consequently, for the first time, companies that manufacture and/or supply pharmaceutical products other than at the retail stage are to pay VAT. Also, gymnasiums and spas, as well as domestic airlines and companies dealing in haulage have also been roped into the tax net.
Although GRA officials could not give ready figures about the number of gymnasiums and spas expected to come under the tax net in the first year, they said they are many.
About two years ago, the GRA attempted charging the gyms and spas VAT, but this was contested in court by one of the entities and the GRA lost the case. The GRA, however, says it is taking advantage of the law to charge the tax now, since it is explicit on the status of gyms and spas. Other entities that were outside the scope but which have now been captured this time include auctioneers, promoters of public entertainment activities, estate developers and operators of financial services which include insurance, life insurance and reinsurance services.
The financial services also included issuing and transferring foreign currency, and operation of a bank account.
Currently there are six domestic airlines operating in the country.


Expatiating on the new VAT rate, the Deputy Commissioner (Policy and Programmes) of GRA, Nii Ayi Aryeetey, said the consultations with stakeholders before the passage of the law had contributed to the smooth take-off of implementation.

“There was a lot of consultation with interest groups for about two years before the law came into force and this has worked well for all of us,” he told the Daily Graphic.

Mr Aryeetey further implored new businesses coming into the tax net that had not registered to contact the nearest GRA offices to do so since the law would not deal leniently with anyone who refused to register.

Western Region

Moses Dotsey Aklorbortu reports from Takoradi that the implementation of the additional 2.5 per cent of the VAT started at the various customs and service points in the Western Region last Wednesday.
While officers and attendants at the various collection points said they received the implementation order late Tuesday and started implementing the new order accordingly, service providers, restaurants and hotels said they were yet to adjust their systems.
Various clearing agents who were in queues at the various points to make payments and clear goods for their clients said they had no option but to pay the new quotations. One of the agents, Charles McCarthy, said there was enough time to sensitise them to the implementation so they were ready to communicate the new rate to their clients.
Hard Choices
Meanwhile, Ghanaians would be forced to make hard choices as prices of household products, groceries and other basic amenities are expected to increase as a result of the implementation the new VAT, Rose Hayford-Darko and Benjamin Xornam Glover report from Tema. A visit to some shops in the port city indicated that while some had started increasing prices of virtually all commodities in line with the new rate, others had not done so on the day the law came into effect.
Madam Mumcy Morrison, Purchasing Manageress at Evergreen Supermarket, told the Daily Graphic that with the coming into force of the new VAT Act, they would be compelled to increase the prices of their goods. Some consumers who also spoke to the Daily Graphic said they would now have to dig deeper into their pockets to buy basic needs for their households and this, coming after the recent hikes in utility tariffs would further worsen their plight.

Freight Forwarders

The President of the Ghana Institute of Freight Forwarders, Mr Joseph Agbaga, speaking on behalf of importers, said the new VAT rate was an additional cost to importers and indicated “as frontliners for importers, we know or feel the pinch more.”

Source: Daily Graphic