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Mid-year budget should focus on taxing e-commerce operations -Tax specialist proposes

BY: Maclean Kwofi
Dr Alex Ampaabeng, Tax Specialist at OXFAM Ghana
Dr Alex Ampaabeng, Tax Specialist at OXFAM Ghana

A Tax Specialist at Oxfam Ghana, Dr Alex Ampaabeng, has said the mid-year budget which will be laid before Parliament today (July 23) should be heavy on tax reforms meant to create the platform to further enhance administrative efficiencies.

Consequently, he observed that the budget should be able to review the whole tax structure with special focus on digital taxation (e-commerce operations) in order to generate enough revenue to bridge the anticipated revenue shortfall at the end of the year.

Some experts have predicted a total revenue shortfall of GH₵10 billion as against a target of GHȼ67.07 billion, leading to widening of the deficit between seven per cent and 10 per cent by the end of the year.

Their projections are based on a reduction in the government’s revenue and grants by GHȼ3.59 billion as against a target of GHȼ13.95 billion for the first quarter of 2020.

An analysis of the first quarter provisional fiscal data on public finances showed that the government missed all the revenue target for the period under review.

However Dr Ampaabeng, in an interview with Graphic Business on July 20 ahead of the presentation of the mid-year budget in Accra, observed that the government should use the mid-year budget to capture e-commerce operations into the tax net.

That, he said, was a crucial step to help increase revenue collection and bridge the anticipated shortfall at the end of the year.

"Due to the outbreak of coronavirus (COVID-19), most businesses are trading online, including those who are in the informal sector. It is time for the Ghana Revenue Authority (GRA) to collaborate with National Communications Authority (NCA) and design a better way to get these businesses into the tax net. If we don't have a digital taxation policy, then I’m calling for one now," he said.

High taxing potential
Dr Ampaabeng noted that the digital economy of Ghana had grown tremendously over the years, and the pandemic had further added a boost to it.

At the global level, he said there were ongoing discussions on taxing the digital economy which was currently being led by the Organisation for Economic Co-operation and Development (OECD).

"I believe with time, Ghana will come on board or devise its main ways of taxing digital activities of multinationals in the country," he said.

According to him, there were high taxing potentials in the digital space in the country which needed to be restructured to widen the tax net and close the high anticipated revenue gap.

Key among them, he mentioned, were the operations of online shops and digital transport businesses such as Jumia, Jiji (OLX), Tonaton, Uber, Taxify and Bolt.

"We also have individuals who generate substantial revenues through their social media following – YouTube, Facebook, Twitter, Instagram and so on. There are also bloggers who make substantial revenue through digital contents.

"There are serious businesses going on on those platforms and not just petty traders. Some have set up real businesses worth millions and need to be taxed. We cannot ignore them because they do not meet the conventional forms of doing business," he said.

Tax evasion
Gradually, Dr Ampaabeng stated that e-commerce operation was becoming a new area for tax evasion as high street businesses might operate in that sector as an alternative outlet, but with high potential to evade.

"I for instance bought all my furniture and fittings for my house without visiting any shop in Ghana. You can literally buy anything off the internet," he said.

For that reason, the tax specialist said GRA must engage stakeholders to design an effective way of taxing online trading activities.

"People must be encouraged to voluntarily register their activities. The Ministry of Communications and NCA must equally support the GRA on data gathering.

"Operators such as Jumia, Jiji and Tonaton must also support the government with relevant data of account holders. These companies must ensure sellers are all verified to reduce cybercrime but also aid GRA’s taxation efforts.

"The GRA must ensure that its staff are up to date with changes in the environment. Staff have to be trained on e-commerce business so they have a perfect understanding of the operation of that aspect of the Ghanaian economy. A dedicated digital economy or e-commerce desk or office within the GRA and experts could be a great starting point too," he said.

Stakeholder engagement
Asked whether heavy tax would not harm the infant e-commerce business and jeopardise the drive to a cashlite society, Dr Ampaabeng disagreed and added that the government needed a broad stakeholder engagement to design an appropriate policy response for e-commerce operations in the country.

"In terms of killing businesses or discouraging businesses to do e-commerce, I really do not think so. What we need is the effective engagement of key stakeholders of the sector and design an appropriate policy response. GRA must support taxpayers and not their usual 'cops and robbers' approach.

"And so, central to my expectations in the mid-year budget is a clear strategy to mobilise revenue domestically, especially areas around property taxation, tax communication, digitisation of tax administration and a solution to the blanket tax exemptions," he added.