In the midst of controversy, Parliament passes the Value Added Tax (Amendment) Bill, 2022
Parliament has passed the Valued Added Tax (Amendment) (No. 2) Bill, 2022.
The Value Added Tax Act, 2013 (Act 870) will be amended in order to raise the Value Added Tax rate from its current 12.5 percent to 2.5 percent.
The bill will examine the transitional conditions for the adoption of the electronic value added tax (e-VAT) system and change the VAT threshold, helping the government to generate GH2.7 billion in revenue in 2023.
Additionally, it will eliminate the VAT on wagering, gambling, and other games of chance as well as amend the administrative sanctions for non-compliance with the electronic Value Added Tax.
On December 19, 2022, the Minister of Information, speaking for the Finance Minister, presented and read the measure for the first time in Parliament.
After then, it was sent to the Finance Committee for review under a certificate of urgency.
No longer an exemption for printed matter
In presenting the committee’s report, the chairman of the finance committee, Kwaku Kwarteng, stated that the committee, by a majority vote, recommended to the House to adopt its report and pass the bill into law in light of the need to raise additional domestic revenue for the development of the nation.
He claimed that the committee had taken notice of the bill’s elimination of the exemptions for imported textbooks, newspapers, architectural plans, and similar plans and drawings, as well as periodicals, magazines, trade catalogs, price lists, greeting cards, almanacs, calendars, diaries, stationery, and other printed materials.
He said that those materials would now be subject to VAT in the typical manner.
Limits for the VAT flat rate system
He informed the House that the committee had noted that, unless specifically instructed otherwise in writing by the Commissioner-General, a taxable person who is a retailer of goods and who makes taxable supplies totalling not less than GHC200,000 but not more than GHC500,000 at the end of any 12 months is required to account for the Value Added Tax due at a flat rate of GHC3,000 calculated on the value of the taxable supply.
The minimum threshold of GH2,000wo may have diminished in importance as a result of recent general inflationary trends, the committee noted. As a result, it urged the Ministry of Finance to review the thresholds in the future.
Unable to come to a consensus
Mr. Kwarteng informed the House that the Minority Caucus on the committee, led by the Ranking Member, Dr. Cassiel Ato Forson, opposed the bill during its consideration because the recent spike in inflation had a negative impact on people’s real incomes and raising the Value Added Tax rate would result in hardship for them.
Additionally, they believed that the National Health Insurance Levy (NHIL) and the Ghana Education Trust Fund Levy (GETFund Levy) were all examples of value-added taxes, making Ghana the continent’s country with the highest Value Added Tax rate if the Value Added Tax rate was raised.
However, he added, “they also acknowledged that failure to adopt the law will result in a fiscal loss of around GH2.7 billion for the 2023 financial year alone.”
Headcount
After the House had discussed the motion for the second reading of the bill made by the Finance Minister, Ken Ofori-Atta, the Second Deputy Speaker, Andrew Asiamah Amoako, asked for a “yes” or “no” response from those in favor and “ayes” or “no” from those opposed. The “Ayes” had it, the Speaker ruled.
The Minority Chief Whip, Mohammed-Mubarak Muntaka, objected to the Speaker’s decision and invoked Order 113, which bothered on division, in an effort to overturn it.
He then requested a headcount or division, and Mr. Amoako instructed the clerk at the table to conduct it. The headcount revealed that 136 members of the majority and 135 members of the minority had cast “No” votes.
Opposition to Bill
Earlier, Haruna Iddrisu, the leader of the minority party, stated that according to the committee’s report, the minority MPs were unable to supnport the imposition of an additional 2.5% Value Added Tax because it would place an even greater burden on Ghanaians, who are already suffering from excruciating hardship.
He stated that he did not think the populace should be forced to bear additional burdens that would raise the cost of living and conducting business in Ghana.
He recalled how the implementation of VAT in 1995 was opposed by the New Patriotic Party, which was at the time the minority party.
He said that the tax instrument now generates more than GH15 billion annually to support the operation of the Ghanaian economy.
Unfavorable history
Alexander Afenyo-Markin, the deputy majority leader, reviewed the track record of the previous administration and remembered that during its tenure between 2009 and 2016, the NDC government enacted a number of levies.
He listed them as the levying of a one percent special import levy, a seventeen percent financial services tax, a five percent real estate sales tax, a five percent exercise duty on petroleum, a seventeen percent special petroleum tax, a kayayei tax on local governments, and cutlass and sanitary pad taxes.
“When we took office in 2017, we removed these taxes and made steps to lower electricity bills by 15% to 30%, which benefitted households,” he stated.
Since the 2.5% VAT is a legal requirement, Mr. Afenyo-Markin stated that the road sector would get 80% of the additional VAT.
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