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01.02.2007 General News

New VAT scheme for informal sector

By myjoyonline
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The VAT Service in collaboration with the Ghana Union of Traders Association (GUTA) has come out with a method that they hope would entice retailers in the informal sector to pay VAT.

The Commissioner of the VAT Service, Mr Anthony Ewereko Minlah, said the standard VAT system, which is currently in operation, makes it difficult for people in the informal sector to do the necessary calculation and file the appropriate VAT returns.

The new method, VAT Flat Rate Scheme (FRS), which is currently in parliament would ease all the difficulties associated with the processing of the standard system.

Mr Minlah noted that the new scheme is not a new tax system but, "it is just the mode of collection to suit the informal sector".

Some of the challenges the VAT Service faces under the current scheme include high non-filing rate, high incidence of non-issuance of invoices and low revenue contribution from the informal retail sector.

Giving more insight into the new system, Mr Anthony Ackah-Mensah, head of Training and Development Unit of the Service said, "The scheme is a VAT collection/accounting mechanism that applies a marginal tax percentage representing net VAT payable on the value of taxable goods supplied".

He said FRS traders would charge a marginal 3% of tax on their taxable supplies and not 15% as it is now. "The VAT Flat Rate Scheme is an alternative to the invoice credit method of VAT accounting."

Mr. Ackah-Mensah said the informal retail sector would operate the system with ease, which would therefore reduce the burden of compliance and lead to the widening of the tax net.

When the system comes to effect all taxable items under the current standard VAT would remain unchanged, likewise the items that are not taxable.

The FRS is to be restricted to only retailers of goods who make a business turnover of ¢100,000,000 per annum but, whose annual turnover does not exceed ¢1.2 billion per annum.

He said those with yearly turnover exceeding ¢1.2 billion would still remain under the standard or the regular VAT scheme.

He enumerated some of the benefits of the FRS as easier record-keeping, simpler to operate, social acceptability of the rate, simplified and easy to complete return form, increase in tax base of VAT registered traders and non-submission of repayment returns.

Nii Ayi Aryeetey, an Assistant Commissioner at VAT Service said the service would undertake a series of educational programmes to get the informal sector and the public to understand and appreciate the new scheme.

He said there would be strict enforcement of FRS and warned traders that VAT Service would sanction defaulters accordingly.

Mr Aryeetey appealed to the general public to demand receipt for any VAT taxable items they purchased.

A leading member of the Ghana Union of Traders Association, Mr Ofori said the system is workable for his members and pledged the full support of the association to ensure smooth operation of the FRS.

Accra Mail