Ghana Approves Multi-Year Expenditure for Digital VAT Collection Platforms

• Ghana's government has approved a multi-year expenditure commitment for digital VAT collection platforms.
• The Fiscal Electronic Device (FED) policy aims to reduce Ghana's VAT gap and generate an additional GH¢7.2 billion in VAT revenue annually.
• A cross-border e-commerce VAT monitoring and collection system is expected to be implemented in September this year, generating an additional GH¢3.2 billion in VAT revenue annually.

The Fiscal Electronic Device (FED) policy aims to reduce Ghana's VAT gap and generate an additional GH¢7.2 billion in VAT revenue annually.

Ghana's government has made a significant commitment to digitalize its revenue collection systems, with Parliament approving a multi-year expenditure for the development and implementation of electronic platforms. This move is part of the Ministry of Finance's efforts to enhance revenue generation, particularly in the areas of Value Added Tax (VAT) collection. The Fiscal Electronic Device (FED) policy, which will be supported by a service provider, aims to reduce Ghana's VAT gap and generate an additional GH¢7.2 billion in VAT revenue annually. This is expected to have a significant impact on the country's revenue mobilization efforts.

The approval of the multi-year expenditure commitment was made in line with the Public Financial Management Act, which requires Parliament's approval for such commitments. The Deputy Minister of Finance, Mr Thomas Nyarko Ampem, emphasized that seeking Parliament's approval was necessary to ensure transparency and accountability in the procurement process. However, the Minority Caucus raised concerns about the lack of details on the procurement process and financial implications of the projects, highlighting the need for greater transparency in government decision-making.

The cross-border e-commerce VAT monitoring and collection system, expected to be implemented in September this year, has the potential to generate an additional GH¢3.2 billion in VAT revenue annually. This system will also help address revenue leakages through real-time transaction monitoring and automated compliance mechanisms. However, some lawmakers have raised concerns about the potential for double taxation of Ghanaians due to the application of the origin and destination principles of taxation.

Lawyers should watch for the potential impact of these digital platforms on tax compliance and double taxation risks, particularly with regards to cross-border e-commerce transactions.

Source: Original reporting via Ghanaian Times