Interest to be paid on outstanding VAT - Selormey

Accra, June 15, GNA - Businesses and organisations that fail to submit the June Value Added Tax (VAT) returns would be made to pay interest on outstanding liabilities, Mr Victor Selormey, a Deputy Minister of Finance has warned.

The interest would be at the prevailing Bank of Ghana discount rate plus one-quarter of that rate for a month on the tax due if it remains unpaid for any part of the month after the date on which it is payable.

In the mean time the 5,000 cedis daily penalty for each day that non-submission of VAT returns continues beyond the due date, would be activated for May returns.

Mr Selormey, was answering an "Urgent Question", in Parliament on Tuesday.

Mr Norbert Garko Awulley, NDC-Builsa South, wanted to know what legal and retrieval measures the Ministry of Finance is taking against companies and organisations that fail to submit their VAT returns monthly as required by law.

Mr Selormey said, using the best information available, the VAT Information Processing System (VIPS) has assessed all businesses, which have so far failed to file returns for any of the four months for which returns submission deadlines are past.

He said the list is being carefully winnowed to eliminate cases where genuine cause exists for non-submission, after which assessment notices would be served to defaulting businesses.

The Deputy Minister told the House that before the end of June, late filers of April returns, which became due at the end of May, would also be issued with notices for the lump sum penalty.

Mr Selormey explained that the imposition of pecuniary penalty is not a revenue tool but only a compliance measure to shore up the rate of submission of returns.

He announced that 44.5 million cedis had been received from payment of the penalty imposed for late submission of February returns as at June three.

He noted that the improvement in the rate of submission of returns for the month of March might be partly due to the imposition of penalties.

Mr Selormey said the VAT Act provides for the imposition of one million cedis for a taxable person, who fails to submit returns and/or make payment by the due date.

There is a further penalty of 5,000 cedis for each day that the default continues.

Mr Selormey explained that the restraint and moderation, exercised by the Ministry in enforcing penalties for the first four months of the operation of VAT, was part of the implementation strategy.

They were to afford registered businesses an opportunity to adjust to the new tax system and to induce compliance.

He said the VAT Service is currently in consultation with the Attorney General's Department for commencement of prosecution and other enforcement measures to recover debts.

He warned that the option of seizing assets and properties of recalcitrant defaulters to recover tax due, penalties and interest after the due date would be exercised when other means of recovery do not yield the desired result.

Mr Selormey announced that from a submission rate of 74.4 per cent for the first month of the tax (January, 1999), the rate went up to 75.3 per cent for February and again to 76.3 per cent for March.

Asked if in spite of several cases of non-compliance in the filing of returns, the VAT was doing well, Mr Selormey replied that for the first four months of the implementation of the new tax system, 55 billion cedis in revenue was collected, five billions cedis short of projected target.

He attributed the shortfall to sluggishness in economic activities, among other factors during the period, but expressed the hope that when economic activities pick up in the latter part of the year, "we hope to raise more revenue from VAT to meet set target".

The government is expected to raise about 720 billion cedis revenue from the VAT this year.

In an answer to an observation that it takes too long to go through the process of filing VAT returns, a situation, which does not make the new tax system customer-friendly, Mr Selormey said an investigation would be conducted with the view to streamlining and facilitating the process.