Uniform e-VAT crucial for effective tax collection

In the last couple of years, the Ghana Revenue Authority (GRA) has made significant strides in improving tax collection and compliance in the country.

 However, there is still room for improvement, particularly when it comes to the rollout of the Electronic Value Added Tax (e-VAT) system. Our current VAT system heavily relies on manual processes, which are not only laborious but also vulnerable to inaccuracies. This not only impedes the efficiency of tax collection but also creates fertile ground for fraudulent activities and tax evasion.

In a concerted effort to eradicate these obstacles, the GRA has rolled out the e-VAT invoicing system following the amendment of Section 42 of the VAT Act, 2013 (Act 870), mandating electronic invoicing as the exclusive method for issuing VAT invoices.

The implementation of this system is poised to empower the GRA to combat various irregularities that have been siphoning off substantial sums of tax revenue from state coffers.

Given that VAT is a consumption tax, the electronic system will enable a larger segment of the populace to contribute to the tax pool, aligning with the call for an expanded tax base.

Under the first phase of the implementation, the exercise was to cover more than 600 large taxpayers, including listed companies, which account for more than 80 per cent of domestic revenue and up to 90 per cent of VAT collections.

The GRA said the e-VAT was expected to cover all VAT taxpayers by 2024 to help the authority monitor transactions in real time, thereby ensuring transparency and eliminating under-invoicing, undercutting and non-issuance of VAT invoices.

Through the exercise, GRA aimed to raise VAT's contribution to tax revenue to 20 per cent by December last year and 30 per cent in 2024. The Daily Graphic is concerned about the unwillingness and reluctance of many retail outlets in the country to comply with the GRA directive and law on the e-VAT system more than 18 months after the initiative took off.

We have noted, through our checks, that while the Value Added Tax (Amendment) No. 2 Act, 2022 (Act 870) enjoined eligible companies, thousands of them, to comply with the e-VAT, most of the companies listed to integrate their billing and receipting system to a GRA designated system were refusing to do so, thereby denying the state millions of Ghana cedis monthly, which translates into billions of cedis a year.

About a week-long mystery shopping conducted by the Daily Graphic revealed widespread non-compliance as an overwhelming number of companies defied the order to issue receipts only electronically through an interface with the GRA’s system.

While we acknowledge the GRA’s response to our front page story of Wednesday, May 8, 2024, titled “e-VAT in limbo: Retail outlets suck economy dry – Nation loses billions in revenue”, stating that a “highly successful” pilot had been completed with 50 taxpayers, and that the e-VAT system would be rolled out in phases, it is important to re-emphasise the bone of contention in our report.

We are of the conviction that the rollout of e-VAT must be uniform to serve businesses fairly and equitably, ensuring that those implementing or complying are not disadvantaged. Uniform implementation is crucial to maintaining a level playing field and preventing any unfair advantages or disadvantages for businesses using e-VAT systems.

The Daily Graphic therefore urges the GRA to stick to its timelines and fully implement the e-VAT system across the board. This system, which the GRA maintains has already been piloted successfully in some sectors, will not only streamline the tax collection process but also ensure fairness and transparency.

As the GRA indicated to the public, during the pilot phase alone that VAT revenue grew by over 58 per cent, representing additional contributions in excess of GH¢384 million, while the e-VAT invoicing efficiency contributed to a revenue impact of GH¢124 million, accounting for 32 per cent of this increase.

Therefore, by fully transitioning to an e-VAT system, the GRA will be able to track transactions in real time, identify discrepancies and inconsistencies more easily, and ultimately increase tax compliance.

This will not only benefit the government in terms of revenue generation but also level the playing field for businesses, ensuring that all companies pay their fair share of taxes. The time is now for Ghana to embrace modern technology in tax administration and move towards a more efficient and equitable tax system.