News going around last week says there is a new tax on digital services. These services supposedly include some popular ones like Netflix, Apple Music, Spotify, and Snapchat. The Ghana Revenue Authority (GRA) came out, however, to make it very clear that this was not a new tax on these digital services. What is going on, and how does it concern you?
The V.A.T
We all know that tax is a fee that governments charge individuals and businesses to pay for education, security, healthcare, buildings, roads, power, and many more. There are different taxes that the government of Ghana charges individuals and businesses. Some include PAYE, which is a fee charged on income, CORPORATE INCOME TAX, which is a fee paid by registered companies, and the VAT.
VAT stands for Value Added Tax. This particular tax is collected in small pieces every time a product is made, bought, or resold along the way to the customer. The final consumer is the one who ultimately pays the full tax. Yes, that includes whatever you pay businesses operating outside of Ghana. They are added to the final price you pay for some goods and services, so you might not notice it. It is quite hard to sometimes wrap your head around, but that is a simple explanation. Collecting this particular tax in Ghana is relatively easy, but not so much when it comes to outside Ghana.
Out with the Old, in with the New
Before 15 October, foreign companies providing digital services to people in Ghana were expected to collect the taxes that applied to their services and send the money to GRA. But think about it. How does GRA ensure that every foreign company selling services to people in Ghana pays the taxes it owes? It is not that simple. In fact, GRA said about 92 foreign companies were already registered and paying these taxes. The challenge was ensuring that others did the same. This system wasn’t really efficient, so GRA switched things up.
Now, when you pay for an eligible digital service using a Ghana-issued bank card, mobile money, or another supported payment method, the payment system can identify the transaction and collect the applicable tax as part of the payment process. Think of it this way: rather than waiting for a foreign company to collect the tax and send it to Ghana later, the new system helps GRA collect the tax when you make the payment. This makes it easier for the government to collect the taxes it is owed.
How does it concern you?
Nothing really changes at this point in time. The price of your favourite subscriptions stays the same. This announcement just means GRA is making its tax collection system more efficient so money owed to them does not go unpaid.
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Featured photo by Tara Winstead
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