Ghana losing millions in revenue for no data to tax online businesses
Adnan Adams Mohammed
A renowned tax expert and legal practitioner has shown worry
as the country is losing millions in uncollected revenue from profitable
online-based businesses, due to the lack of specific tax laws and the absence
of a proper database of all online businesses operation in the country or providing
services to the Ghanaian public.
With the current flooding of online shopping malls, food
vendors, fashion accessory retailers and other similar businesses using online
which are earning millions in revenue, are not properly profiled for tax purposes
by Ghana Revenue Authority (GRA).
Abdullah Ali-Nakyea shares his worry that “The current tax
rules which were designed to address “brick and mortar” economies appear
inadequate in the tax issues posed by the digital economy.”
He explained that unlike commerce, e-commerce as an aspect
of the digital economy does not take place in a physical market and this
renders the task of identifying the seller and buyer in those transactions for
tax purposes very difficult.
In reference to a 2018 report by the Organisation for
Economic Co-operation and Development (OECD), on the digital economy, he
repeated that “there will be a drastic reduction in revenue mobilization as
most tax avenues are dissipated through digitalization.”
However, he observed that “Due to the nature of the digital
economy, tax authorities face the administrative issue of identifying
businesses, determining the extent of their activities, collecting and
verifying information, and identifying customers.”
Mr. Ali-Nakyea, who was speaking at the ‘2nd Public Lecture
Series’ organised by the Institute of Chartered Accountants Ghana (ICAG), in
Kumasi, acknowledged that this ‘tax challenge’ posed by the digital economy is
a worldwide issue.
He suggested the expansion of the ‘Permanent Establishment’
(PE) under the Income Tax Act, 2015 (Act 896) to include the provision of
services in relation to e-commerce.
He added that a working definition for e-commerce could be
adopted from the Value Added Tax Act, 2013 (Act 870).
He further called for the enforcement of Regulation 7 of the
Value Added Tax Regulations, 2016 (L.I. 2243). This requires agents of
non-resident persons in Ghana to register and charge VAT if a non-resident who
provides telecommunication services or e-commerce to persons in Ghana fails to
register and charge VAT.
He said a well-thought and tailor-made policy will be needed
to address this challenge while considering the likely international consensus
to be adopted to deal with it.
Mr. Ali-Nakyea, however, cautioned that the approach should
be made simple as possible so as not to place unnecessary impediments in the
way of players in the digital economy. Any impediments, he noted, will only
lead to alternative innovative means of tax avoidance.
The ICAG public lecture was organized under the theme
“Taxing the Digital Economy: The Way Forward.”
The President of ICAG, Prof. Kwame Adom Frimpong, said it
has become necessary to address the tax challenges on digital businesses to
ensure that international tax rules are applied to both the digital and the
more traditional sectors of the economy.
He noted that a number of African governments have spotted
the potential for raising money by taxing the increasing numbers of digital
consumers.
Prof. Adom-Frimpong said the GRA needs to learn from other
nations who have taken bold steps to tackle tax leakages in the digital economy
through innovative tax legislation while adding that Ghana stands to gain a lot
from that.
The Deputy Commissioner in-charge of the Large Taxpayer
Office (LTO), of the Ghana Revenue Authority (GRA), Mr. Edward Gyambrah, who
was one of the key speakers at the public lecture, said every citizen has a
role to play in ensuring that the country is able to mobilise enough revenue to
undertake development.
He said efforts are being made by both the Ministry of
Finance and the GRA to ‘tax’ the digital economy as an emerging area.
He said the current tax laws provide an idea on how to go
about this process but there is the need to come out with some guidelines and
some regulations as to how to go about it.
However, he said this could be done with the collaboration
of institutions like the National Communications Authority (NCA), which has the
platform to register businesses online.
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