The Ghana Union of Traders Association (GUTA) has raised concerns about the current Value Added Tax (VAT) structure, stating that it does not align with the realities of the retail and wholesale sectors.
Charles Kusi Appiah Kubi, Head of the Business and Economic Bureau at GUTA, emphasised that the existing VAT system creates challenges for businesses, leading to compliance issues and financial strain.
Speaking on Channel One TV, Kubi explained that the disparity between the standard VAT rate of 22% and the 4% rate for some goods creates an uneven playing field.
He noted that consumers, facing reduced disposable income due to inflation and economic challenges, often opt for cheaper products, leaving businesses struggling to meet their tax obligations.
Charles Kusi Appiah Kubi, further highlighted that businesses are often forced to lower their prices to remain competitive, which can lead to non-compliance with VAT regulations.
“When I get to the market and I am looking for a product to buy, I will be looking for the product at an affordable price. The standard rate is at 22% and I am on 4%, the customer is not under any compulsion to buy at the standard rate. Because the disposable income has been affected by inflation or has been depleted by economic challenges.
“So, I will want to buy something from the 4%. If I am not able to sell for the period as a business and for a period of time, how do I commit to my tax obligation, and pay my salaries, or even for the rent? It will get to a point, that I will be compelled to even not charge the standard rate so that I can also sell to meet my obligations.
“When I begin to do that GRA will come after me and I will have to use part of my working capital to pay GRA because I did not take my VAT to meet up with the shortfalls. This has been the narrative in business in the retail and wholesale sector. It is because the structure of VAT does not support the dynamics within the retail market, and we have said this severally,” he stated.
Kubi emphasised that a revised VAT structure would not only ease the burden on businesses but also encourage compliance and foster growth in the sector.
“So, if we are looking at tax that inspires self-compliance, there is the need to review the VAT system. Already there is the cascading effect of VAT because it defies the principle of taxation, which is tax on tax,” he stated.
