Collaborate to find solution to tax issues posed by the digital economy -Tax consultant

A Tax Consultant and Managing Partner of Ali-Nakyea and Associates, Abdallah Ali-Nakyea has has called on the Ghana Revenue Authority (GRA) to build stronger collaboration with the Ministry of Communications and National Communication Authority (NCA) to be able to tax economic activities on e-commerce platforms.

Unlike conventional commerce, e-commerce which does not take place in a physical market, he said, renders the task of identifying the seller and buyer in those transactions for tax purposes very difficult.

He was speaking at a lecture in Accra organised by the Institute of Chartered Accountants, Ghana (ICAG) on the theme, ‘Taxing the digital economy: The way forward’.

He explained that the current tax rules which were designed to address “brick and mortar” economies appear inadequate in addressing the tax issues posed by the digital economy.

To address the challenge, he said, it was imperative that the GRA partners with agencies that regulate platforms on which e-commerce was done to identify the business activities and tax them accordingly.

“Digital economy has now grown to include businesses on social media and websites. The Ministry of Communications and the NCA regulate these telecommunication operators which know the various accounts being used for economic activities and so through them the GRA can identify them for tax purposes,” he stated.

In the absence of laws and channels to tax e-commerce activities, Mr Ali-Nakyea explained that the country risk a drastic reduction in revenue mobilisation as most tax avenues are dissipated through digitalisation.

“The sellers who usually engage in e-commerce transactions avoid the payment of direct tax such as income tax and buyers who engage in e-commerce transactions also escape the payment of indirect taxes including VAT. This is a threat to the government’s revenue target,” he stated.

In the GRA’s quest to address the tax issues that the growth of the digital economy poses, he said there was also the need for tax neutrality which would serve as a cushion for businesses to grow rather than being overburdened by taxes which could lead to collapse.

He said an approach that places unnecessary impediments in the way of players in the digital economy would also result in alternative innovative means of tax avoidance.

In the meantime, Mr Ali-Nakyea asked the government to expand the definition of Price per earnings (PE) under the Income Tax Act, 2015 (Act 896) to include the provision of services in relation to e-commerce.

Additionally, he urged for the enforcement of Regulation 7 of the Value Added Tax Regulations, 2016 (L.I. 2243) which requires agents of non-resident persons in Ghana to register and charge VAT if a non-resident who provides telecommunication services or e-commerce to persons in Ghana fails to register and charge VAT.


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