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06 July 2017

3% VAT Flat Rate To Stay As Finance Minister Concludes Meeting With Parliament

The much heralded meeting between the Finance Minister Ken Ofori Atta and the Parliamentary select Committee on Finance over the controversial 3% VAT rate has ended with little change.

If anything, the Finance Minister has promised to engage more with the public on the flat rate policy that has set members of the Association of Ghana Industries on a collision course with their counterparts at the Ghana Union of Traders Association (GUTA).

The Minister was invited by the committee to explain and possibly announce the suspension of the policy which took effect Jul 1, 2017.

The 3% VAT rate is an amendment of Value Added Tax Act, 2013 (Act 870)

The amendment gives legal backing to a new VAT Flat Rate Scheme (VFRS) that will facilitate collection of VAT & National Health Insurance Levy (NHIL) on the supply of goods by wholesalers and retailers; and classifies the supply of financial services, domestic air transportation and sale of immovable property by real estate developers as exempt supplies.

The implementation of the tax policy has triggered some deep seated controversy.

Some industries, manufacturers and importers claim the implementation of the new tax law will lead to the increase of prices of goods and services, a claim government and officials of the Ghana Revenue Authority have been quick to dispute.

Members of the AGI have been at the forefront in challenging the propriety of the new VAT law.

The Minority in Parliament has also waded into the controversy. A former Deputy Finance Minister was vehement in his criticism of the new tax regime.

Describing it as a ‘419’ or a fraudulent taxation regime, Casiel Ato Forson said government must listen to the concerns of manufacturers and importers and withdraw the tax.

“All of a sudden the VAT burden instead of it being reduced has become an increase. This is because the value added flat rate only relates to retailers. For some reason, the government decided to include wholesalers.

“If you are to extend to wholesalers it is an imposition of an additional tax,” he said, adding, “what they are doing is a 419 way of imposing taxes on the ordinary Ghana. They tricked Ghanaians into introducing additional tax.”

But the Finance Minister after his engagement with members of the Parliamentary select committee on Finance said there will be no turning back on the law.

Joy News’ Parliamentary correspondent Joseph Opoku Gakpo reported the Minister as saying the meeting with the MPs was successful.

According to minister, his attention has been drawn to the possibility of double taxation or the cascading effect of the policy and that his government will seriously look at.

He added there will be series of engagement with all stakeholders to ensure the policy is implemented smoothly.

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