Traders demand withdrawal of 3% flat VAT in 14 days

July 11, 2017
Source: Richard Annerquaye Abbey/thebftonline.com/Ghana
Traders demand withdrawal of 3% flat VAT in 14 days

The Wholesalers, Importers, and Shop Owners Union of Ghana (WISUG) has asked that government, as a matter of urgency, withdraws the 3 percent flat VAT rate which came into effect recently, or they would be forced to resort to "radical" measures.

The group told the B&FT it is giving government up to 14 days to rethink the VAT which, it says, has worsened the tax burden of its members.

It said the flat VAT rate introduced under the Kufour-led NPP administration had more clarity than what the second NPP government is introducing, describing it as "deceptive."

The union said the initial agreement it had with government was for the 17.5percent rate to be maintained for goods in the threshold of GH¢20,000, while all others that fall below the threshold are made to pay the 3%.

But the Ghana Revenue Authority (GRA), in a directive to businesses, explained that under the flat rate, a registered taxpayer who is a retailer, wholesaler or importer of goods shall have a marginal Value Added Tax (VAT)/National Health Insurance Scheme (NHIS) levy rate of 3%, representing the net VAT payable on the value of taxable goods supplied.

"The marginal rate of 3% represents the net VAT payable and is the difference between the output tax and the input tax of a wholesaler/retailer if the taxpayer were operating the Standard Rate Scheme," it said.

"It has a marginal tax rate of 3% applied to the value of taxable supply of goods. It does not allow input tax credit i.e. VFRS operators shall not be entitled to input tax claims. It is restricted to only wholesalers and retailers of taxable goods. Taxpayers operating the VFRS shall issue a simplified VAT/NHIL invoice,” the GRA explained.

Chairman of the aggrieved group, Joseph Ablor, said the cumulative effect of this wholesale implementation is a hike in the tax rate by the time the goods get to the final consumer.

Contrary to the explanation provided by the tax authorities, Mr. Ablor argued that 3 percent rate will be charged along the chain of distribution“ from import, wholesale, distribution, and retail, meaning that by the time it gets to the final consumer, there would be a price increment.

"This, the union considers very inimical to the growth of the local businesses because the final consumer will have to pay about 18 percent in practical terms," he said.

"WISUG is reminding the government of its policy of making the local businessman the pivot of economic development and growth.  However, should government not engage us, we will resort to more radical action that will be announced at an appropriate forum," he said.