GRA implements 12.5% upfront payment to enforce VAT compliance

In a bid to enforce VAT compliance and ensure parity in the administration of taxes, the Ghana Revenue Authority (GRA) has introduced a significant measure through the VAT (Amendment) Act, 2022 (Act 1082). As of today, Tuesday, June 6, 2023, importers who qualify for VAT registration but have failed to do so will face an additional charge of 12.5% on the Customs value of taxable goods they import.

This move by the GRA is not to be mistaken as a new tax, but rather as a compliance tool designed to encourage the timely registration and filing of tax returns. By imposing an upfront payment on eligible importers, the GRA seeks to incentivize individuals to fulfill their VAT obligations, bringing about fairness and consistency in the realm of tax administration.

The upfront payment will be applicable to taxable goods imported in commercial quantities with a value equal to or exceeding GHS 200,000. Its implementation aims to create a level playing field for all importers and promote a transparent and equitable tax system.

Addressing concerns that this measure might place an additional burden on importers, the GRA has clarified that importers who choose to make the upfront payment can potentially recover the amount when they eventually register for VAT and file their VAT returns. Act 1082 explicitly provides for this possibility, further underlining the intention behind the upfront payment as a compliance mechanism rather than an outright tax.

In light of the GRA’s announcement, it is crucial for importers who qualify for VAT registration to take immediate action. The GRA emphasizes the importance of registering at the nearest Taxpayer Service Centre (TSC) to avoid incurring the upfront payment. By doing so, importers can proactively comply with their VAT obligations, ensuring a seamless and streamlined importation process.

This development from the GRA demonstrates the government’s commitment to enhancing tax compliance and reinforcing the country’s fiscal framework. VAT registration and the proper filing of tax returns play a vital role in generating revenue for national development initiatives, such as infrastructure projects, social programs, and public services. By encouraging importers to meet their VAT obligations, the GRA aims to bolster the economy and create a more sustainable and prosperous future for Ghana.

The introduction of the upfront payment as a compliance tool aligns with global best practices in taxation and revenue generation. Similar mechanisms have been implemented in various countries, with positive outcomes in terms of increased compliance rates and enhanced tax collection. The GRA’s initiative reflects a forward-thinking approach, demonstrating its commitment to modernizing tax administration and fostering a culture of tax compliance in Ghana.

However, it is worth noting that the success of this measure depends not only on the GRA’s implementation but also on the willingness and cooperation of importers. The GRA’s appeal to importers to register for VAT at the nearest Taxpayer Service Centre (TSC) is a call for proactive participation and responsibility. Importers have a crucial role to play in supporting Ghana’s economic growth and development by fulfilling their tax obligations promptly and accurately.

The Ghana Revenue Authority’s implementation of the upfront payment through the VAT (Amendment) Act, 2022 (Act 1082) signifies a significant step towards enhancing VAT compliance in the country. Importers who qualify for VAT registration must heed the GRA’s call and take immediate action to register at the nearest Taxpayer Service Centre (TSC) to avoid the additional charges on taxable goods they import. This initiative, while not a new tax, serves as a compliance tool to promote fairness, consistency, and transparency in the administration of VAT. By encouraging VAT compliance, the GRA seeks to strengthen Ghana’s fiscal framework and pave the way for a more prosperous future.