Tax Effects of COVID–19 in Ghana
Ghana has always had deficit budgets and domestic tax revenue mobilisation has always been important in determining the amount of the deficit.
There are three major sources of government revenue and these are taxes collected by Ghana Revenue Authority, loans, and grants.
Domestic tax revenue for 2020 will be affected significantly because of the corona virus which has crippled many businesses globally.
The world economy generally has been slowed down due to COVID–19 and developing countries have had their fair share.
The following are some of the effects of COVID – 19 in Ghana:
1. Employee taxes: Due to job losses and reduction in the number of employees due to the lockdown and its associated directives, the employee taxes paid have reduced considerably. During the lockdown, some employees had their appointments terminated while others were asked to work for shorter periods and this led to lower employee taxes being deducted and paid to Ghana Revenue Authority (GRA).
2. Import duties that are collected at the various entry points in the country have reduced due to the fact that that most businessmen who travel to other countries to buy goods into the country cannot travel due to the ban on travel around the world. Orders that were even made prior to the outbreak of the virus cannot be shipped or brought through other means as a result of the closure of our borders.
3. Decrease in the Tourism Levy: As a result of the closure of most hotels and other recreational centres, there has been a significant reduction in the 1% tourism levy that is collected and this has affected domestic revenue mobilisation.
4. Airport taxes: The GRA will collect virtually nothing from airport taxes because of the cancellation of flights due to the ban on travel. The expected revenue from taxes on tickets are not forthcoming and will lead to lower or nil revenue being collected.
5. Withholding Taxes: Transactions that involve withholding taxes will be affected because most businesses ceased operations during the lockdown and currently the transactions are not as many as expected because of the measures that have been put in place. Withholding tax schedules that are expected to be filed with GRA and the relevant payments made have all reduced and the revenue generated from them has also reduced considerably.
6. Corporate Taxes – With the latest developments, most businesses are now picking up regarding sales and services being rendered and due to the additional cost of providing hand sanitisers, nose masks,” Veronica buckets”, water, tissue paper, etc., businesses that are on self assessment have filed nil taxes. This is because they do not foresee an improvement in the prevailing conditions and, therefore, it will be unwise to declare profit or chargeable income so that corporate taxes can be paid.
Regarding businesses that are given provisional assessments by officials of GRA, they will object to the assessments which will mean a reduction in the tax assessments.
The result is that domestic tax revenue will reduce significantly, which will throw our budget out of gear.
7. VAT/NHIL/ GETFUND Returns: Due to the lockdown, business activities came to a halt and revenue that is generated from VAT, especially on the flat rate of three per cent, was affected. Also those on the standard rate virtually filed nil returns because there were no output and input.
Currently, the situation, though better, has not yielded the expected revenue and the result is that the GRA may not be able to mobilise the expected revenue.
Expansion of businesses
Despite the negative effects of COVID–19 as seen from the above, it has led to the expansion of existing businesses and the creation of new ones which will eventually lead to profits being declared and the relevant taxes paid.
For example, businesses in the textile industry have expanded regarding the provision of nose masks and attire for the prevention of the spread of the disease.
Businesses that are engaged in the production of sanitisers and disinfectants have seen increases in their sales which are expected to lead to higher profits and, therefore, taxes being paid.
One other positive effect is that transactions that were previously done physically are now done online through electronic commerce and that has led to the expansion of such transactions.
The challenge is that the (GRA) is unable to fully track these transactions and assess them appropriately.
One cannot tell when the pandemic will go and so we must all begin to find alternative ways of doing business so that we will be able to run our businesses well and pay the relevant taxes in accordance with the tax law.
The Ghana Revenue Authority has done well by ensuring that certain returns can be filed and payments made directly into their account but that has its challenges. For example, it is sometimes difficult for the GRA to determine the type of tax for which payment was made and in addition, the period for which the payment was made.
The best alternative is to make it possible to enable taxpayers to file returns online and make payments as well.
We are not in normal times and there is the need for all of us to co – operate with the tax authorities so that it will be much easier for them to mobilize domestic tax revenue which will enable government to carry out its policies.
The writer is a tax consultant
[email protected]