Mr. Speaker, I beg to move, that the Value Added Tax (Amendment) Bill, 2006 be now read a Second time.
Mr. Speaker, in moving the motion, I want to draw hon. Colleagues' attention to the Memorandum relating to this Bill.
In the 2006 Budget Statement to Parliament, reference was made to the introduction of a special Flat Rate Scheme (FRS) for the collection of VAT in the informal retail distribution trade sector. The scheme is aimed at simplifying the Value Added Tax collection and accounting mechanism to address daunting difficulties faced by the informal sector and also to improve compliance in that sector. It is envisaged that the special FRS would address the attendant challenges faced by the VAT Service in its administration of the VAT, in respect of the informal retail
sector which has grown in size and is still growing.
The projection is that the introduction of the Flat Rate Scheme will result in an enhanced revenue mobilization from the retail sector because the tax net would be widened.
The purpose of the Bill is therefore to amend the Value Added Tax Act 1998, Act 546 to enable Parliament give legal backing to the proposal. I beg to move.
Chairman of the Committee (Nii Adu
Daku Mante): Mr. Speaker, I beg to read your Committee's Report.
The Value Added Tax (Amendment) Bill, 2006 was laid in the House on Thursday, 14 th December 2006 and referred to the Finance Committee for consideration and report in accordance with the 1992 Constitution and the Standing Orders of the House.
To consider the Bill, the Committee
met with the Minister for Finance and Economic Planning, hon. Kwadwo Baah- Wiredu, Deputy Minister for Finance and Economic Planning, hon. Prof. George Gyan-Baffour, the VAT Commissioner, Mr. Anthony Minyilah and officials from VAT Service as well as the Ministry of Finance and Economic Planning and reports as follows: 2.0 References
In considering the Bill, the Committee referred to the following documents:
1. The 1992 Constitution of Ghana.
2. Value Added Tax Act, 1998 (Act 546)
3.0 Purpose of the Bill
The purpose of the Bill is to amend the Value Added Tax Act, 1998 (Act 546) as amended to give legal backing to a Flat Rate VAT Scheme that will facilitate the collection of VAT in the retail trade sector and to provide for related purposes.
The Committee observed that the Flat Rate Scheme (FRS) has been developed to address difficulties being encountered by retail traders in the informal sector in administering the standard credit system of VAT currently in place.
The Commit tee was informed that the Scheme was borne out of the recommendations of a committee set up by the Value Added Tax Service and the Ghana Union Traders Association (GUTA) to find a simplified system for accounting for VAT in the retail trade sector.
The Committee again observed that the FRS is not to entirely replace the current input/output system but to run concurrently with it.
It was also noted by the Committee that all taxable, zero-rated and exempt goods will remain so under the Flat Rate Scheme.
Again, the Committee was informed that operators of the Flat Rate Scheme would issue a simplified VAT/NHIL invoice to their customers instead of the existing one.
The Committee noted that retailers of goods shall be issued with the regular VAT certificate of registration when they register with the VAT Service. In addition to the certificate, the Service will issue special stickers to those operating the FRS
Scheme which they will display in their shops to inform consumers/customers that they are operating the FRS scheme.
The Committee observed that the Flat Rate Scheme has the benefit of easier record keeping, social acceptability, as well as simplified and easy completion of returns.
The committee informed the Committee that revenues accruing to NHIL would not be affected as the ratio of 5/6: 1/6 between VAT and NHIL will be maintained.
The VAT Commissioner expressed optimism to the Committee that the introduction of the Flat Rate Scheme will widen the tax base thereby enhancing national revenue mobilization.
The Committee was informed by the VAT Commissioner that based on scientific calculation, and using the legal rate of the VAT and NHIL levy, approximately 3 per cent represents the effective rate of tax (using the input/output tax system) as opposed to the 5 per cent proposed by some Members.
The Committee noted through its deliberations with the VAT Service that some retailers above the ¢1.2 billion threshold have been abusing the current input/output tax system and thereby successfully reducing their taxes.
In the light of this, the Committee proposes an amendment that would ensure that all retailers of goods would account for VAT under the Flat Rate Scheme, save that the Commissioner may direct a retailer of goods to account for VAT under the Invoice Credit Method where the Commissioner believes such a directive would best serve the nation's revenue interest.
Mr. Speaker, your Committee also has proposed certain amendments to the Bill. It will do so at the appropriate stage.
In conclusion, Mr. Speaker, your Committee concludes that it is in the right direction as it will help enhance VAT revenue collection in the retail trade sector. The Committee therefore respectfully recommends to the House to adopt its Report and pass the Value Added Tax (Amendment) Bill, 2006 subject to the amendments proposed.
Question put and motion agreed to.
The Value Added Tax (Amendment)
Bill, 2006 was accordingly read a Second time.