It is a new year and time for a rant!!! Just before Christmas, I went to Takoradi to buy a few items that were needed to replace faulty components in my hotel.

Call me naive. Call me foolish. But I think that we should all contribute to “Helping Build a Better Ghana”. God knows that I have done my share of collecting and paying taxes for the Government of Ghana since I built the hotel and made the country my permanent home in 2001.

“What happened to bring this on?” you may ask. Well, the week before that trip I asked a friend who has a shop that sells various building supplies if she could supply our hotel a water heater to replace one which is faulty. She offered to have one brought on her next load of supplies from Accra. She called her supplier for the price and I gave her the money in advance. I stopped to pick up the water heater on the appointed date and requested a receipt from my friend, the shop keeper.

My friend and I have had discussions about the VAT before so she knows how I feel about it, but she proceeded to tell me that she could get me a receipt but not a VAT receipt and she would have to  get it directly from her supplier. She explained that the supplier would not provide her with a VAT receipt for that item or any of the other items which she had brought from Accra. She went further to tell me that none of the wholesalers in Accra collect or pay VAT. Bottom line – no VAT receipt for my purchase, and no credit to offset the VAT which my hotel collects from all of our guests and submits to the Government of Ghana.

Not good enough for me – I have been down this road too many times. This is an area that you don’t see many folks here talking about and I am going to offer my guess of the reason why. Folks fit into several categories:

1. they live off the land and do not use cash in their day to day living

OR

2. they don’t give any consideration or care about what happens to the country

OR

3. they know that their family and/or friends are dodging the VAT tax and they don’t want to be seen as traitors

OR

4. They are in business and are themselves actively avoiding the collection and payment of the VAT tax

This is not a complete list. The bottom line is this: the VAT tax is not working and a lot of businesses are falling through the cracks in the system.  The VAT Service and ultimately the citizens of Ghana lose out in this situation, and so will my friend – I will not be buying from her shop until she starts to conform to the laws of the land.

This happens over and over, every day, in this country. The original VAT is a tax which does not work in this country. It is too complicated for many businesses, whose book keeping is not able to deal with a Value Added Tax. Apparently the VAT Service recognize this problem and that is why they have implemented the VAT “Flat Tax” of 3%. Unfortunately they did not have to courage or the insight to scrap the “value added” idea altogether and change the regime to a straight flat sales tax for everyone, with a lower rate. This would be something that would be much easier for retailers to understand, for consumers to accept, and for the Service to administer. It would also be much fairer to all businesses – at the present time, the hospitality industry is required to collect and submit 15% tax with very few VAT inputs to offset the output, while retailers are allowed to collect and submit only 3% tax. Where is the fairness in that?

2011 is a new year and I for one think that it is time for the Government of Ghana to revisit the VAT system and make it fair for all by changing it to a flat tax and by ensuring that it is enforced uniformly.