CUTS welcomes VAT collection on cross-border digital services

CUTS International, a Ghanaian research and public policy think tank, has endorsed the introduction of real-time tax collection for cross-border digital services. CUTS believes this step is crucial for safeguarding Ghana's revenue stream and ensuring a level playing field for all businesses. The think tank commends the Ghana Revenue Authority (GRA) for its dispute resolution mechanisms in place for wrongful deductions, but urges the government to reconsider the treatment of tuition fees for recognized foreign distance learning programs.

The combined tax rate for digital services, known as "20% VAT," is made up of 15% VAT, 2.5% National Health Insurance Levy, and 2.5% Ghana Education Trust Fund Levy. Real-time tax collection doesn't introduce a new tax on these services; it simply improves the enforcement of existing tax obligations on digital services through participating payment providers.

The organization emphasizes that the use of an online payment channel should not determine tax liability, and exempt supplies should maintain their exemption status. CUTS stresses that as consumption shifts from physical products to electronic delivery, Ghana's tax administration must adapt to ensure that tax collection follows the underlying consumption.

They use Microsoft Office and streaming services as examples to illustrate this point. The writer highlights that as commerce moves online, tax collection must follow suit to maintain an effective tax base. CUTS also expresses concern over applying the combined charge to tuition for recognized foreign distance learning programs while exempting comparable education provided locally.

They argue that the fairness of the policy should be based on the nature of the education and the recognition of the provider, not the location of the teaching platform.