When the aroma of roses hits the nostril of the tax man, give him part of your offspring to liberate your tentacle
The Value Added Tax is one tax type paid by the taxable supplier to the revenue agency, the Commissioner-General. The tax is normally computed on the value of the service performed or goods supplied or imported after relevant levies, duties and charges are considered in arriving at the taxable value. However, it is unclear when it comes to tourism levies whether the levy should form part of the supplier or be considered independently for computing the VAT. The revenue authority issued a ruling clarifying the position. However, there are concerns that the clarity provided was inconsistent with the law. Administrative rulings generally are binding on the revenue authority so long as the factors leading to the ruling remain constant. The author wishes to add his thought to the debate.
Tourism levy to form part of the services or goods supplied by tourism operators
A tourism levy is a levy imposed by the Tourism Act on patrons of tourism operators.
Section 23 (1) b) of Act 817 provides that one of the sources of funds for the Tourism Board should include a one per cent levy payable by a patron of a tourism enterprise specified in the schedule.
Based on this section, it appears that the patrons of the tourism facility are responsible for paying the levy when they use the facilities provided by tourism operators. Although the Tourism Board is deemed as the entity charging the levy, it is actually collected by the facility operators.
However, until the revenue authority provided clarity, it was unclear as to whether the levy paid by the tourism patrons should be included in the invoice prices of services provided by the operators. Notwithstanding, there are some practitioners who believe that given the construction in section 43 of the Act, the levy should form part of the taxable value. These practitioners may not be wrong because section 43 of Act 870 is far-reaching and somehow ambiguous. That is to say that duties or levies, or charges included in determining the taxable value should be limited to only taxes collected or paid to the Commissioner-General, or other levies or charges not administered by the Commissioner-General should be included.
The position of the VAT Act 870
To begin, one needs to know the context within which the VAT is computed and what would be the basis of the computation. Section 1 of Act 870 indicates that VAT is charged on the taxable value of goods or services supplied and, in the case of import, on the value of the import of goods. Section 43 of the VAT Act defines taxable value as follows.
The value of a taxable supply, where the supply is for monetary consideration, is the amount of the consideration with the addition of all duties and taxes, excluding the tax; and where the supply is not for monetary consideration or is only partly for monetary consideration, is the open market value of a similar supply excluding the tax.
From this definition, it is necessary to examine the meaning of ‘consideration’ as outlined in section 43 of Act 870 carefully or taxable value. To do so, we should refer to section 65 of the same Act.
Section 65 of Act 870 defines consideration as:
“in relation to a supply of goods or services and an import of services to include the total amount in money or in kind paid or payable for the supply by any person, directly or indirectly, and duties, LEVIES, FEES AND CHARGES paid or payable on, or because of the supply or import of services other than the tax; and is reduced by a deposit other than a deposit on a returnable container and by any discounts or rebates allowed and accounted for at the time of the supply or import of services”.
From the meaning provided for by S.65 of Act 870, a consideration for taxable supply must include the levies and fees charged to be part of the supply of the service or goods. The question is whether the levies, charges and fees referred to in section 65 or 43 of Act 870 should only be taxes administered by the Commissioner-General.
The meaning of taxes in Act 915
Reference is therefore made to section 9 of Act 915 as follows:
Act 915 defines what constitutes a tax. It states:
“9. (1) For the purpose of this Act , ‘tax’ means a duty, levy, charge, rate, fee, interest, penalty or any other amount imposed by a tax law or to be collected by, or paid to, the Commissioner-General under a tax law”.
There are two ways to glean the meaning of a tax from S.9 of Act 915.
- A duty, levy, charge, rate fee, interest, penalty or any other amount imposed by a tax law is a tax; or
- A duty, levy, charge, rate fee, interest, or penalty or any other amount to be collected by, or paid to, the Commissioner-General under a tax law.
In this case, a levy may refer to an amount imposed by tax law or collected by or paid to the Commissioner-General under a tax law. The other concern is whether a tourism levy is imposed by tax law or collected by the Commissioner-General under a tax. Obviously, it is not collected by the Commissioner-General under a tax law. The Tourism Act is not a tax law per se under Act 791. But it makes provision for the imposition of tax to the extent of the Article 174 of the 1992 Constitution.
The constitutional provision
Article 174 of the 1992 Constitution provides that:
“(1) No taxation shall be imposed otherwise than by or under the authority of an Act of Parliament”.
Can it be interpreted that the constitutional provision means that any levy imposed under Parliament’s authority constitutes a tax or a tax law? Furthermore, does this extend to section 23(1) (b) of the Tourism Act 817, making it a tax provision or law, for that matter, to be included as part of the taxable value within the meaning of Act 870?
The answer to this could be yes or no. This is because the constitution does not define a tax or what makes a tax law. As a result, we have to refer to Act 915 which then defines taxes, or Act 791 on what constitute a tax law.
Considering section 9 of Act 915, which appears to be a general law that administers all other tax laws, one needs to be careful in exporting the provision in Act 915, particularly where the provision is inconsistent with another tax law. On that basis, the general maxims of interpretation of a law, Generalia specialibus non-arrogant, must have some effect. The VAT Act and the Revenue Administration are two separate laws, with one given specific consideration (VAT Act) and the other given a general application (Revenue Administration Act).
Reference is made to The Republic Vrs High Court Accra & Unique Trust Financial Services Ex-Parte: PPE Limited & Paul Juric, Bonney & Others No 1 V. Ghana Ports And Habour Authority No. 1, 2013-2014 1 SCGLR 436.
The recent decision of the High Court in the case of Republic v. The Commissioner General Exparte: Agility Distribution Park Gh Ltd., where the Court gave effect to the VAT Act as a specific law rather than the Revenue Administration Act 2016 ( Act 915), is emphasised here.
From this, where the VAT Act refers to taxes, levies, charges and fees forming part of the consideration or the value of service performed, then the reference to the taxes, in this case, must be given a specific consideration as contained in a tax law.
It is important to note that the levies, charges and fees mentioned in sections 43 and 65 of Act 870 should be considered specifically as those administered by the Commissioner-General within the context of Act 915 or Act 791.
That is to say that the levies, charges and fees referred to in sections 43 and 65 of Act 870 could only be those collected or paid to the Commissioner-General under a tax law and not the larger spectrum of taxes provisions in other laws made under an Act of Parliament which are administered by other statutory bodies. If one has to take into account all other taxes or levies in determining the value of goods for the purpose of VAT, one can therefore imagine how this can impact prices.
In conclusion, in order to fully understand the legal framework of the tax as contemplated by Section 43 of Act 870 as well as Section 9 and the implied interpretational maxim of law, there is a need to decouple the Tourism Levy and any other levies other than those only collected or administered by Commissioner-General. The constitutional provision is also critical in this circumstance.
Based on the afore-mentioned analysis, and for the application of the tourism levy to be consistent with section 43 of Act 870, the levy should not form part of the taxable value. In that case, the clarity provided by the revenue authority is consistent with the intent of the Vat Act.