GRA happy with financial services tax system

Mr. George Blankson, the Commissioner General, Ghana Revenue Authority (GRA), says implementation of the financial services tax has been crucial to the economy’s management as it is raking in substantial revenue.

“The concern was that it was going to hugely affect participation in banking; that is, people’s capacity and zeal and even readiness to put the money in the banks, because when they began charging VAT on services offered by banks, it was expected there would be a revolve-response.

“But since we started you can hardly notice it; it operates very quietly below the surface and the revenue comes in at the end of the month,” he said.

The implementation of 17.5 percent VAT on fee-based financial services took effect at the beginning of this year.

He said this at a two-day African Tax Administration Forum (ATAF) in Accra, and explained it was aimed at improving the tax management systems on the continent on the theme “Designing and Implementing VAT systems in a Globalised Economy”.

The conference, hosted by the GRA in collaboration with the African Tax Administration Forum, was attended by participants from 18 African countries. 

It provided the platform for participants to share ideas and discuss how to make VAT more efficient and effective. It also served as the foundation for a new approach to African taxation policies.

Mr. Blankson said for VAT to work effectively, there is a need to consistently re-design and implement strategies for its effectiveness -- adding that VAT has various advantages, especially when stakeholders relate it to the financial system.

 Mr. Blankson said VAT is the largest contributor to government revenue in Ghana. “For VAT implementation to be effective, it depends on how it is designed. When there are more exemptions, it creates avenues for evaders to take advantage,” he said.

He said since VAT is a consumption tax, it is difficult to evade and easy to administer, unlike the other direct taxes such as income tax -- which with sophisticated skills some businesses try to avoid.

 "In Africa, where the informal sector is quite big, the VAT is very effective because it is a consumption tax; and so long as people consume even those in the informal sector continue to consume by way of buying goods in the form of clothing for upkeep.

"So long as they continue making purchases, they will continue to consume goods and services so they will continue paying the VAT, unlike income tax which requires those employed to file their returns.

"Where they are employed by bigger organisations, the organisation themselves will charge the tax on the formally employed and account for it," Mr. Blankson remarked.

Mr. Lincoln Marais, the Director, Strategy and Planning ATAF, said the forum’s objective was targetted at developing tools to help the African continent effectively collaborate in tax administration.

He said the forum was established in order to create a platform that promotes and facilitates mutual cooperation among African tax administrators.

He also said the forum is in the process of developing a tax rule to guide all member-countries, and expressed hope that the conference’s outcome will help members in the global tax administration system.

Mr. Marais explained that ATAF is focusing on five key approaches that look at all the issues around developing capacities on the continent in all areas of the tax arena.

This, he said, is the core mandate of  ATAF, which is actually helping companies on the continent to develop more efficient and effective taxes systems.

"We are in the process of setting up a technical assistance facility because we realise that we can bring our member-countries and other stakeholder together in meetings like this.

 “Though member-countries have their local challenges in ensuring that they collect the revenue required by government, we cannot afford to lose sight of the global issues because obviously they affect us,” he remarked.