Tightening VAT compliance
Reports that only about 60 per cent of companies registered for Value Added Tax (VAT) are compliant should be a matter of serious national concern (See front page).
At a time when the country is striving to mobilise domestic revenue to finance development and reduce excessive borrowing, any significant tax gap undermines collective progress.
Taxation remains the lifeblood of every state. No nation has developed without a reliable tax system.
Taxes fund the provision of public goods and services that are either too costly or unsuitable for private provision — defence, public infrastructure, education, health care, sanitation and law enforcement.
The link between taxation and civilisation itself is well established. Historical and biblical accounts remind us that systems of taxation have existed for millennia as a means of organising society and sharing the cost of governance.
It was partly to improve efficiency and compliance that many countries, including Ghana, moved from traditional sales taxes to consumption taxes such as the Value Added Tax system.
Unlike sales tax, which is charged only at the final point of sale, VAT is applied at each stage of production and distribution, once value is added.
The Daily Graphic understands that this creates a transparent chain of transactions that allows tax authorities to cross-check records and verify compliance.
By taxing only the value added at each stage, VAT also prevents tax cascading — the imposition of tax upon tax — thereby promoting fairness and neutrality in the tax system.
However, its effectiveness depends heavily on compliance by both the collector and the consumer.
When businesses fail to register, file returns or collect VAT but do not remit it to the state, the system is weakened.
Such acts deny the nation much-needed revenue and shift the tax burden unfairly onto compliant taxpayers.
On the other hand, consumers or customers purchasing items from shops and companies also have a sacred duty to demand that invoices are produced on designated VAT receipts.
The Daily Graphic, therefore, considers it deeply troubling that non-compliance remains so widespread.
We think it is not merely a regulatory lapse but a matter of civic responsibility.
Collecting VAT from consumers and withholding it from the state amounts to using public funds for private purposes.
In this regard, the formation of a dedicated VAT compliance task force is a welcome move.
According to a lead member of the team, Wisdom Xetor, the task force will immediately begin nationwide operations to tackle non-registration, non-filing and non-remittance.
The adoption of a risk-based and intelligence-led approach, with a focus on high-risk sectors and habitual offenders, is commendable.
Equally important is the commitment to sustained taxpayer education and engagement, since voluntary compliance often improves when taxpayers understand both their obligations and the benefits derived from taxes.
Nevertheless, enforcement alone will not solve the problem. Sustainable compliance is built on a combination of deterrence, convenience and trust.
We think continued digitalisation of tax administration is essential. Electronic invoicing, digital VAT filing and integrated payment platforms reduce human discretion, minimise errors and create reliable audit trails.
Again, stronger data matching across government agencies — including business registration, customs and income tax databases — can expose discrepancies and deter under-reporting.
In addition, we urge the Ghana Revenue Authority to simplify procedures for small and medium-sized enterprises, as many smaller businesses struggle with complex filing requirements.
Clear guidance and simplified regimes can improve compliance without imposing undue burdens.
More importantly, public confidence in tax usage must be strengthened.
When citizens see visible and accountable use of tax revenue in roads, schools, hospitals and sanitation, compliance naturally improves.
There is no doubt that transparency fosters trust.
Finally, penalties for non-compliance must be firm, fair and consistently applied.
Sanctions must be deterrent enough, such as heavy fines, long prison terms and asset confiscation.
Predictable enforcement deters evasion while maintaining the credibility of the tax system.
Ultimately, VAT compliance must be seen as a shared national duty
We must not see businesses as merely taxpayers.
They are partners in development.
A strong culture of compliance, supported by education, transparency and effective enforcement, will yield far greater dividends than periodic crackdowns.
