1. VAT RISK MANAGEMENT IN GHANA REVENUE AUTHORITY
Edwin Acheampong & Iris Botchway
12/5/2018

2. Presentation Outline INTRODUCTION
The Objective
VAT in Ghana
Operational VAT Risks
The Advent of Risk-based VAT Audits
RISK MANAGEMENT AND VAT ADMINISTRATION IN GHANA
Introduction of Risk Management in the Ghana Revenue Authority
Management of VAT Risks in Ghana Revenue Authority
Role of Risk Management in VAT Administration
CONCLUSION
GRA needs to do More…
Flip through presentation outline

3. INTRODUCTION

4. Introduction… The Objectives…
Present and discuss GRA’s experience in the area of Risk Management as it relates to VAT administration
Conceptualize the role of Risk Management in VAT Administration in the Ghana Revenue Authority (GRA)

5. Introduction… Value Added Tax (VAT) in Ghana
VAT was first introduced in 1995 at a rate of 17.5% (but scrapped after three months) and re-introduced in 1998 at a rate of 10%
Currently, two VAT Rates are operational in Ghana:
Standard Scheme: 17.5% (Service providers, Manufacturers, etc.)
Flat Rate : 3% (Wholesalers and Retailers)
VAT Collection Performance: So far, not so good….
VAT: A significant contribution to Ghana’s economic development

6. Introduction… Value Added Tax (VAT) Operational/Compliance Risks
Small VAT Base (large informal sector)
Refusal to register (Deliberate action of potential taxpayers)
Non-compliance (Non-filers, Nil-filers, Credit filers, suppression of sales, Poor record keeping, Carding or Carbon Shifting)
Aggressive Tax Planning/BEPS (Transfer pricing, etc.)
VAT Refunds (False claims, Delays – Fast track refund processing introduced)
Upfront Relief of VAT (Determination of input-output ratio poses a challenge)
Unprofessional/unethical attitude of staff (Collusion, etc.)
Mounting VAT debt stock (Submission of payment returns without payment)

7. Introduction… Risk-based Value Added Tax (VAT) Audits
Enforced by Top Management
All VAT audits to be preceded by risk profiling taxable persons
Manual determination of risks problematic (subjective)
Information processing system (the Total Revenue Integrated Processing Systems – TRIPS) yet to be deployed to assess risk
Automation of VAT risk assessment – the way to go

8. RISK MGT. & VAT ADMINISTRATION

9. Risk Mgt. & VAT Administration…
Risk Management in Ghana Revenue Authority
GRA created the Risk Management Unit in 2013
Risk Management Unit is headed by an Assistant Commissioner
The Risk Management Unit sensitizes staff on Tax Risks
A Draft Risk Management Policy and Framework is in place
Risk Governance Structure yet to be created

10. Risk Mgt. & VAT Administration…
Managing VAT Compliance Risks in Ghana Revenue Authority
Risk-based audits
VAT audit is concentrated on registered taxpayers who pose risk to the tax system
Partial Exempt
Perpetual Credit filer
Multiplicity of Branches
Turnover
Swoops
It involves surprise retrieval of records from the premises of a taxpayer without prior notification where there are reasonable grounds to believe that taxpayer will not readily surrender records on request
Test Purchases/Mystery Shopping
It is where an Officer is tasked to buy from suspected non compliant taxpayers who do not issue the Commissioner General’s VAT/NHIL Invoice/receipt

11. Risk Mgt. & VAT Administration…
Managing VAT Compliance Risks in Ghana Revenue Authority…
Operation Dragnet
It involves sending Compliance Officers to a selected geographical area to check tax compliance of every business. This is done by going from door-to-door in the targeted area. This method is usually very productive in identifying potential taxpayers who have not registered or filed required returns.
Compliance/Educational Visits
It is follow-up visits to evaluate compliance level, ascertaining and addressing teething compliance difficulties encountered by registered taxpayers. It is mostly undertaken on small and medium scale businesses that have been registered for some time and do not show growth in revenue performance or are found to be slipping but may not immediately require a comprehensive audit in the face of audit resource constraints.

12. Risk Mgt. & VAT Administration…
Managing VAT Compliance Risks in Ghana Revenue Authority…
Overtaking/Re-performance audits/Management Assurance visits
This is the practice where an officer or a team is detailed to check on the work carried out by another officer or team. The aim is to ensure maintain professionalism and staff integrity
Taxpayer segmentation
Taxpayer have been segmented into Large, Medium and Small. The idea is to focus on the needs of the various segments without putting all Taxpayers into one basket. It makes good business sense and increases voluntary compliance, and tax revenue
Invigilation
This involves stationing staff (at least two) at the premises of the taxpayer to observe the issuance of tax invoice and business practices on daily basis for at least one month.

13. Risk Mgt. & VAT Administration…
Managing VAT Compliance Risks in Ghana Revenue Authority…
Tax Amnesty
GRA has granted tax amnesty to taxpayers of all tax types including VAT and those who qualify to register to charge the tax. This intervention is expected to rope in new taxpayers and to entice existing but defaulting VAT persons. It is expected to run from st January to 30th September, 2018
VAT Withholding (yet to be implemented)
This is a new provision where selected VAT-registered companies have been authorized by GRA to withhold seven percent (7%) of the VAT component of payments due to their trading partners. The aim is to ensure the Authority rakes in as much of the tax due as possible

14. Risk Mgt. & VAT Administration…
Managing VAT Compliance Risks in Ghana Revenue Authority…
Other VAT Risk Compliance Strategies…
Imposition of Interest and Penalties
Improved taxpayer services – Ease of filing, Extending payment facilities, etc.
Treating VAT-registered persons a clients:
Professional treatments
No negative suspicions (taxpayers seen as potential thieves, etc.)

15. Risk Mgt. & VAT Administration…
Role of Risk Management in VAT Administration: The GRA Position
Safeguard the status of VAT as a sustainable source of revenue for economic development and the integrity of its management by maximizing VAT Revenue collection
Ensure VAT transparency: To create awareness of VAT Compliance Risks, both within the Authority and related to taxpayers. A clear indication that the tax is being managed well by the Tax Administration; That, potential risks are preempted and dealt with promptly
Mitigate VAT Compliance Risks by creating awareness of the Tax Risk Management, Strategy and Governance of taxpayers (especially multinationals, Telcos, Oil & Gas companies) that could adversely affect VAT revenues from a critical constituency

16. Risk Mgt. & VAT Administration…
Role of Risk Management in VAT Administration: The GRA Position…
Monitor and proactively evaluate legislative changes and their potential impact on businesses and staff in relation to VAT revenue mobilization.
Adequately assure the Government and stakeholders that VAT operations are well coordinated with other functions of the Authority. That, VAT risks are maintained at an acceptable level
Assurance of adherence to standardized strategies, policies and processes for managing VAT and the other tax types. This enhances the integrity of the system for administering VAT and related procedures and processes

17. Risk Mgt. & VAT Administration…
Risk Management in VAT Administration: The Challenges
Manual assessment of VAT risks:
TRIPS yet to be fully deployed to assess risks
Absence of a Risk Management Governing Council
A contributory factor to the low risk awareness in the Authority
Low Risk Awareness among staff
Risk consciousness among GRA staff is low and this is adversely affecting how operational risks are related to and handled

18. CONCLUSION

19. Conclusion… GRA Needs to do MORE in terms of:
Developing a comprehensive Risk Management Policy
The Draft Policy should be reviewed and approved by Top Mgt. and the Board
Training Staff in Risk Awareness
Risk Champions for each Operational Unit/Office
Putting a Risk Management Governance Council in place
- Such a Council will promote Risk Management across the Authority

21. Thank You

22. Q & A