TAXES IN GHANA

Posted on November 5, 2009

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Official VAT receipt

DEMAND YOUR OFFICIAL VAT RECEIPT

I mentioned TAXES in the last post.

Here in Ghana there is the 15% VALUE ADDED TAX which establishments in the hospitality industry are required by law to collect. Strangely enough, most businesses here in Ghana include this tax in their rate, that is the business will pay the tax, not the client…Conjecture on why…the rate publicized will be lower  and will thus attract clients  and probably it will be in keeping with all the rest of the establishments that provide comparable services.

But there is a sad consequence….a lot of places don’t issue any receipt or they just issue their own OFFICIAL RECEIPTS, not the official VAT receipt. Some places might give you a fancy printer generated receipt, but, and this can happen,  it sure is easy to push that  ole delete button and presto-no transaction!

The long and the short of it is a lot of revenue that is supposed to going into the government coffers to pay for better schools and hospitals, roads and sanitation-just isn’t reported and collected!

Incidentally, Four Villages Inn’s rates, published on our web site,  are all quoted as “including full breakfast, excluding 15% VAT“.

Now why am I writing this? Just the other day we had two parties staying at Four Villages. They had made separate bookings; and although they were friends of the same nationality,  they didn’t know that they would meet each other at Four Villages Inn… Anyways one party was led by a fellow who has lived here for some time  and works for a European company. The other party of two women were  new to Ghana. One of them is married to a guy who was starting to work for the same European company as the fellow leading the other party.

So co-incidentally, the two parties  both  scheduled to check out on the same day. First, the fellow who has been here for a  time…I go through the bill with  him-explaining the two sub-totals  , rooms and meals and then the sum-total for the two taxes 12.5% for the VAT and 2.5% for the NHIL (National Health Insurance Levy) and then the Grand Total. He understands the bill completely.

Then the two ladies check out. Because one of the ladies is going to be here for five years, I tell  her this VAT receipt is the kind of receipt she should insist on when she is using services from any company involved in the hospitality industry, hotels, restaurants etc.

Well, she says this is the first time she has seen such a receipt and,  right then and there,  she pulls a so-called Official Receipt, unstamped or anything,  from her wallet. The company’s name doesn’t even appear on the receipt!

It turns out that the receipt is from the car hire for their trip around Ghana for  six days at US$120.00 per day times GH 1.45 =  GHC1,044! Now here in Ghana there is a formula to work out the tax if it is included in the rate. It’s 3 times the total, in this case 1044×3=3132, divided by 23, in this case 3132 divided by 23=136.17. GH C 136.17. GH C 136.17 is the tax for the nation; the remainder is for the company=GH C907.83.

NOW THAT’S A LOT OF MONEY HERE! You can multiple that by all the other transactions for which no VAT receipt is issued and that’s a lot of tax revenue in some individual’s pocket! Money that could buy re hydration tablets to prevent death by diarrhea….or chalk for teachers. Oh, you know what I talking about.

Anyways I told the lady when she is back in Accra to demand a VAT receipt from the car hire!

Now this little situation, this microcosm of the big picture, can be discussed on the macro level. Here’s  a question to act as a springboard for thought/discussion: IF IT IS THE CASE, WHY HAVEN’T GOVERNMENTS BEEN VERY SERIOUS ABOUT TAX COLLECTION?

ONCE UPON A TIME HERE IN GHANA, YOU SAW LOTS OF VAST BILLBOARDS URGING CITIZENS TO PAY THEIR TAXES PROMPTLY…DON’T SEE MANY/ANY THESE DAYS…

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