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Tax lecturer proposes amendment to law on withholding taxes

BY: Emmanuel Bruce
William Kofi Owusu Demitia- Lecturer at the School of Law, University of Ghana

Lecturer at the School of Law, University of Ghana, William Kofi Owusu Demitia, has called for an amendment of the law on withholding tax to allow data controllers to act as tax withholding agents for the state.

He said that was one way that the government could take advantage of the booming the E-Service business to grow the country’s revenue base.

Mr Kofi Owusu Demitia said this at the Graphic Business/Stanbic Bank Breakfast meeting held in Accra on March 22, 2022.

This edition, the first of four quarterly meetings scheduled for the year, was on the theme: ‘Integration of E-Service into our economy - Implications for economic growth and quality of life.”

“Whenever there is a payment made on these E-Commerce platforms, the aggregators are the ones who hold the money and pay it to the vendors. This is why our laws on withholding tax needs to be looked at again,” he stated.

He pointed out that under the law, it was only a person who makes a payment that has the withholding obligation, if certain thresholds were satisfied.

“But in other jurisdictions, withholding agents include anybody who has custody of the money.

In this case, we could have the data aggregator whose App is being used to become a withholding agent for the appropriate taxes to be deducted at source and paid to the GRA,” he explained.

Solution to address revenue challenge

The Law Lecturer noted that e-commerce provided the country with the perfect solution to address its revenue challenges.

He said when it comes to revenue generation, there were two challenges that the Ghana Revenue Authority (GRA) was faced with: The ability to identify taxpayers, and the ability to track their income to find out whether they are fulfilling their tax obligations.

“Today, in the comfort of your home, you can go on any ride sharing app and order that somebody pick you up to a certain destination. For you to be able to do that, you must register with the app and for the driver to be certified to drive you, that person must be registered with that app.”

“If you want to purchase any item or food, you can log unto an app to do that. Again, you need to register first and whoever is the vendor must also be registered. What we have seen here is that data is being generated and so the issue of identifying a taxpayer if the person is operating on an E-Commerce platform is largely addressed,” he explained.

He said the biggest challenge was how the GRA was leveraging on these data by liaising with these data aggregators to get the information.

Liaising with data aggregators

He said the GRA could liaise with the data aggregators to introduce Tax Identification Numbers (TIN) as a requirement for registration as a vendor or as a person providing a service through a ride sharing app.

“In the same way that I pay for a ride or pay for food or product that is delivered through an app and get an instant receipt acknowledging how much I paid, what I ordered and the vendor I ordered from, that information can go to GRA seamlessly.”

“If there is a TIN attached to that, there is an opportunity for GRA to track the income of the vendor. So as the system begins to formalise and we generate data, our biggest problem is how we mine the data to find out how people are fulfilling their tax obligations,” he stated.

Taxing local vendors

Mr Demitia said it was necessary for the government to look at raising revenue from local vendors, where it is easy to get the data before moving on to the Amazons, E-Base, Google, and other global players.

“When we think of E-Commerce, we think of it in the broader sense such as the Amazons, EBay, and Google but that is far-fetched because before we can even agree on whether to tax the income they are getting from this country, there has to be a global forum of agreement because they don’t just have services in Ghana.”

“So let us concentrate on home-grown solutions, where we have the data available to us. We have bloggers who are being paid so much from their YouTube channels. Why are we not linking up with YouTube to get data on the people earning income from their channel?” he pointed out.