VAT flat rate aims at expanding tax net

Story: Boahene Asamoah

THE Commissioner of the Value Added Tax (VAT), Mr Anthony Ewereko Minlah, has said that the introduction of the VAT flat rate scheme, targeted at the informal sector is aimed at expanding the tax net in order to address some of the problems of the informal sector.
He said the high rate of non-filing of tax returns,the high incidence of non-issuance of invoices and bad record keeping were some of the problems of the informal sector.
Speaking at a one-day seminar for a cross-section of journalists on the VAT Flat Rate Scheme (VFRS), in Accra on Wednesday, Mr Minlah said the flat rate was not a new tax system but a modified tax on consumption to suit the informal sector.
He said the scheme was a VAT collection accounting mechanism that applied a marginal tax percentage, representing net VAT payable on the value of taxable goods supplied and was an alternative to the invoice credit method of VAT accounting which was currently being used.
Making a presentation on the scheme, the Head of Training and Development Unit of the VAT Service, Mr Anthony Ackah-Mensah, said the challenges that faced the informal sector under the standard VAT system was the difficulty in claiming back tax, low record keeping and unfair competition.
Mr Ackah-Mensah said the proposed scheme had a marginal three per cent tax to be charged by traders on their taxable output, and explained that the scheme was an alternative to the invoice credit method of VAT accounting.
He said the scheme was restricted to all retailers of goods who made business turnover of ¢100 million per annum but whose annual turnover did not exceed ¢1.2 billion per annum.
“Retailers of goods who are currently registered to operate the standard or regular VAT scheme but whose business turnover does not exceed ¢1.2 billion over a 12 month period shall be converted to the scheme by the service”, Mr Ackah-Mensah stated.
He explained that the reason why the scheme was being piloted or restricted to the trade sector was because the sector operated largely as the informal sector.
He said some of the benefits of the scheme included, easy record keeping, was simple to operate, social acceptability of the rate and a simplified and easy to complete return form.
An Assistant Commissioner in charge of Research, Monitoring and Planning, Mr Nii Ayi Aryeetey, said appropriate training programmes had been organised for management staff and field operation officers to ensure timely and efficient delivery of service.
“Appropriate training programmes will also be delivered to leaders of identifiable distribution and retail trade associations,” he stated.