I have been thinking about how to break down GRA’s new or amended policy on cross-border VAT to highlight its practical implications. The following are my initial thoughts. I may share a technical note later.
GRA’s explanation that “we are not introducing a new tax but we are just putting a mechanism to collect an existing tax” is clever grammar, but bad economics.
What GRA has actually done is broaden the base of VAT to cover transactions you never paid VAT on before. That, by definition, is a new tax to you.
They admit it themselves. Commissioner-General Anthony Kwasi Sarpong says 92 foreign companies were registered and charging. Now GRA says it has identified over 100 additional foreign providers who were NOT charging. And in other briefings, officials say over 1,000 entities will eventually be roped in.
There is nothing wrong with broadening the tax base to realize more revenues. But don’t deceive people that such policy decision does not impose a new or additional tax burden to the taxpayer. Broadening the base is qualitatively not different from introducing a completely new tax in so far as they both impose additional incidence on the taxpayer.
Taxpayers are concerned about the economic incidence on their purse/pocket and not the legal regimes of taxes. This is legally not a new tax but economically a new tax. You enact the law, the taxpayer pays.
Think about that. For those 1,000+ new companies, you never paid 20% VAT before. From October 15, you will. If you used Canva for your business flyers, paid to boost a post for your hair business, or paid for CapCut Pro, you never paid VAT. Now you will.
The same applies to, among others, services such as Netflix, Spotify, Betway, Disney, Zoom, Google Workspace, Roblox, McAfee, ExpressVPN, Booking.com, Uber, and Bolt.
Any amendment to a tax policy that imposes an obligation or burden on you that you did not have to suffer before is a new tax to you. Don’t let them fanfool you with Act 870 and Act 1151. The law may have existed in a book. The deduction from your pocket is new.
Not just the rate but the construct of the Tax itself is problematic
Charging 20% is too much. But the rate is only part of the problem.
First, it is inequitable. A student in Ghana studying at University of Ghana pays no VAT because local education is exempt. The same student studying the same accredited course at University of London online, Coursera or Udemy pays 20% because the server is abroad. Two students, same country, same qualification, different tax. How is that fair?
Second, it taxes productivity at the same rate as entertainment. Netflix and a nursing revision course both attract 20%. Kenya charges 16%, Nigeria 7.5%, South Africa 15%. None stacks two levies on top.
Third, double taxation is real. GRA says banks will ensure merchants display VAT-exclusive prices and you won’t pay twice. What mechanism has the GRA put in place to address merchants who fail to display such tax salience and deliberately cause merchant errors to charge sales tax on exports using the origin principle? Again, what power does GRA have over a US company to stop charging US sales tax? What portal exists for a freelancer to prove he was double-taxed and get a refund?
The Most Harrowing Part: MoMo and the Return of E-Levy
What is strikingly harrowing is that GRA has now extended this to mobile money.
The Commissioner-General confirmed on Joy FM: “So once it’s a transaction payment going through the banking system… Assuming you are also using your MoMo to pay, that will also be captured.”
So this is not just your Visa card. MTN MoMo, Telecel Cash, AT Money – all will deduct 20% at the point of payment.
So now a young Ghanaian lady who uses her MoMo to pay $5 to boost her Instagram boutique, or $10 for TikTok ads to sell wigs, or $3 for YouTube Premium to learn makeup, has to pay 20% VAT on top?
Is that not the rebirth of the E-levy we fought with our blood?
We fought E-levy because it taxed our mobile money, punished the youth hustling online, and taxed the same money twice. Government said E-levy is gone. Now you bring Real-Time VAT that does exactly what E-levy did. Every time you use MoMo to pay a foreign platform to enhance your social media presence, you pay 20% extra.
The lady boosting her business on Facebook with MoMo is not Netflix. She is not watching movies. She is trying to survive without a government job. She is the productive sector government says it wants to support with its $10 billion New Economy fantasy. And you tax her MoMo 20%?
Free social media is not taxed, GRA says. True. But no young person builds a business on free social media alone. You pay to boost, to advertise, to get Canva Pro, to get CapCut without a watermark. All those payments now attract 20% whether you use a card or MoMo.
GRA says it will split the payment: merchant gets 80%, and the government takes 20%. You will get an SMS. But that SMS is the same SMS we got for E-levy – “tax deducted.”
We ended E-levy only to get E-levy Pro Max – broader, automatic, no threshold, no exemption.
If this is not a new tax, why does my MoMo balance reduce by 20% more than last week for the same transaction?
And if you doubt me just check the receipt of how much you paid for Starlink internet, Netflix, McAfee, Zoom, Google Workspace, and so on last month and compare that with how much you will pay at the end of this month and tell me if you are paying the same amount or something more.
As they say, the length of the toad is known only after after it’s death.
A word to the wise …
Dr. Gideon Boako writes
