The Ghana Revenue Authority (GRA) has identified about 100 additional foreign digital service providers that are not currently charging Value Added Tax (VAT). The Authority plans to bring these companies into its tax collection system. This move aims to expand the tax net and ensure compliance for cross-border digital services.
Commissioner-General of the GRA, Anthony Kwasi Sarpong, made this disclosure during a discussion on tax applicable to services like Netflix and Spotify. He explained that these new providers would be gradually integrated as the GRA expands its compliance efforts. This initiative follows the existing system where 92 foreign companies already remit VAT to the GRA.
This development is part of Ghana's broader strategy to enhance domestic revenue mobilization, especially from the growing digital economy. The government seeks to capture taxes from services consumed by Ghanaians but provided by foreign entities. This aligns with global trends where tax authorities are adapting to the challenges of taxing digital services. Previous efforts have focused on improving tax administration and reducing revenue leakages across various sectors.
Mr. Sarpong clarified that the obligation for foreign companies to charge VAT on services to Ghanaian consumers has existed since 2013. He stated that the new collection mechanism will not add an extra 20% to charges from providers whose prices already include the tax. He confirmed that pricing from the 92 existing merchants will remain unchanged. However, bringing new providers into the system will extend VAT collection to their qualifying services.
The GRA's current system relies on service providers to collect payments, report transactions, and then remit the tax. Mr. Sarpong noted this leaves the Authority dependent on company declarations, with limited independent verification means. The new system will use technology to separate the tax component at the point of payment. This amount will then be transferred directly to the government, with the remainder sent to the service provider.
This technological intervention is part of the GRA’s Real-Time VAT framework for qualifying cross-border digital services. Elsie Appau-Klu, Technical Advisor to the Commissioner-General, previously explained this framework collects existing VAT at the point of payment. This process involves participating financial institutions. The combined 20% charge includes 15% VAT, a 2.5% National Health Insurance Levy, and a 2.5% GETFund Levy.
Mr. Sarpong emphasized that the collection system will cover qualifying payments made through various platforms. This includes mobile and other digital payment platforms, as well as bank cards. He clarified that the initial rollout applies specifically to services, not physical goods bought from foreign online platforms. Imported goods are already assessed for duties and VAT when they enter Ghana through its borders. This distinction ensures that the new measures target digital service consumption effectively.
The expansion of the VAT net to more foreign digital service providers is expected to boost government revenue. It also aims to create a fairer playing field between local and foreign service providers. Businesses and consumers should monitor how this new collection mechanism impacts service availability and pricing in the digital landscape. The GRA's commitment to leveraging technology for tax collection signals a more robust approach to fiscal management. This move could encourage greater compliance across the digital economy, contributing to Ghana's financial stability.