My post VAT has generated over 11,900 views. The post hit a nerve – concerns about the amount of tax and the workings of the VAT system.
Many of the commentators noted that the telecommunications companies calculate VAT on Communication Service Tax (CST), GET Fund Levy (GETFL) and the National Health Insurance Levy (NHIL).
So, I investigated how much extra tax the government has taken from me in that manner.
Here’s the original invoice as itemized by a telco I usewith an extension to calculate the VAT on each tax type.
| GHS | VAT 12.50% | |
| Value of current invoice | 777.86 | 97.23 |
| CST 9% | 70.01 | 8.75 |
| GETFL 2.5% | 19.45 | 2.43 |
| NHIL 2.5% | 19.45 | 2.43 |
| Subtotal | 886.77 | 110.85 |
| VAT 12.5% | 110.85 | |
| Total | 997.62 |
Of the total VAT of GHS 110.85, GHS 13.61 came from charging VAT on CST, GETFL, NHIL!If you aggregate the taxes taken each month across the country, that is a significant amount of money to take for no value added!
SO, IF IT IS A VAT SYSTEM, WHAT IS THE VALUE ADDED BY COMMUNICATION SERVICE TAX, GET FUND AND NHIL LEVIES?
Principles are principles! It is time to correct the disregard for principles and apply the VAT principles as intended by the law.
It’s also time to reassess the changes making NHIL and GET Fund elements levies. What is the cost and benefit? Is the overall impact on the economy positive?
The effect of tinkering with the system is that the levies are now an expense for business. Each time businesses buy inputs they incur an expense not for the inputs, but as a tax to the government. Before the changes, businesses did not incur additional expenses other than the cost of the goods or services.
The levies suck capital from businesses that struggle to raise fundingl for business. It is bad for business and investments. It is time to reassess the levies.
It is better, in my view, to abolish the levies, raise the rates (VAT, NHIL, GETF) and allow businesses to offset these taxes against the output tax. This way, when they purchase inputs it will not affect their capital as now.
This is important because finding adequate financing is a big challenge for all Ghanaian businesses. They must also grapple with inflation.
In these circumstances, it is imperative that we help the private sector preserve capital so they can maintain their businesses and invest. We need a vibrant private sector. A vibrant private sector does not happen by accident.
Should you have questions about this or article or need help with VAT or other taxes, contact us at in**@sc*.gh
