VAT: New rate takes off on June 1

THE VAT Service has announced that the implementation of the new VAT rate of 12.5 per cent takes effect from June 1, 2000.

The additional 2.5 per cent when collected will be applied to the purposes outlined in the Education Fund Bill, which is currently before Parliament, or be kept in an account pending the passing of the bill.

This was contained in a statement issued by Mr. Ezekiel Asamoah, Director of the VAT Secretariat, in a reaction to a Chronicle publication captioned “President signs VAT Bill. But Educational Fund not ready. Prices to go up by 25%”.

It said Parliament passed the Valued Added Tax (Amendment) Bill in March this year raising the VAT rate from 10 to 12.5 per cent. The Act received Presidential assent on April 19, 2000 and has since been gazetted.

The statement said although the VAT Amendment Act became ready for implementation in early May, its effective implementation was delayed to afford the business community ample time for preparation and adjustment of cash register machines and other record keeping systems to cope with the change.

It said the VAT Secretariat has also used the period to gear itself up to ensure a smooth transition from 10 to 12.5 per cent.

The statement explained that the bill exempts some inputs from the pharmaceutical industry from the tax to boost competitiveness and preserve employment in the manufacturing industry.

It said the price impact of the increase of the VAT rate should, therefore, be no higher than 2.5 per cent, and the exemption of pharmaceutical inputs should have the impact of bringing down the cost of locally-produced pharmaceutical products.

Meanwhile, the Ghana National Union of Polytechnic Students (GNUPS) has expressed dismay at the signing of the VAT Amendment Bill.

This, it said, is because the Educational Trust Fund Bill, which is conterminous with the VAT Amendment Act, has not yet been debated by Parliament and may not be passed anytime soon.

A statement issued by the GNUPS in Accra said the law, which has now increased the VAT rate from 10 to 12.5 per cent, is expected to increase the prices of goods and services without a concomitant increase in the salaries of the Ghanaian worker.

It said if there is no attendant increase in the emoluments of workers, the intention of well-meaning workers to donate willingly to the fund will be derailed.

The GNUPS, therefore, appealed to the government not to consider the increase in VAT as the only source of funding the educational fund, but to explore alternative sources suggested by organisations including the union.

The GNUPS also urged Parliament to debate the Educational Trust Fund Bill as expeditiously as possible to ensure its implementation, and appealed to well-meaning Ghanaians to donate generously to the education fund.