This, he said is due to the lack of specific tax laws and the absence of a proper database of all online businesses operating in the country or providing services to the Ghanaian public.
For instance, he said, online shopping malls, food vendors, fashion accessory retailers and other similar businesses that reside online and generate millions in revenue, are not properly profiled for tax purposes.
“The current tax rules which were designed to address “brick and mortar” economies appear inadequate in the tax issues posed by the digital economy.”
Mr Ali-Nakyea said this while speaking at the ‘2nd Public Lecture Series’ organised by the Institute of Chartered Accountants Ghana (ICAG), in Kumasi, Ghana.
According to him, that unlike commerce, e-commerce as an aspect of the digital economy does not take place in a physical market and this renders the task of identifying the seller and buyer in those transactions for tax purposes very difficult.
In reference to a 2018 report by the Organisation for Economic Co-operation and Development (OECD), on the digital economy, he repeated that “there will be a drastic reduction in revenue mobilization as most tax avenues are dissipated through digitalization.”
He observed that “Due to the nature of the digital economy tax authorities face the administrative issue of identifying businesses, determining the extent of their activities, collecting and verifying information, and identifying customers.”
The Tax Expert, hence, suggested the expansion of the ‘Permanent Establishment’ (PE) under the Income Tax Act, 2015 (Act 896) to include the provision of services in relation to e-commerce.
He added that a working definition for e-commerce could be adopted from the Value Added Tax Act, 2013 (Act 870).
He further called for the enforcement of Regulation 7 of the Value Added Tax Regulations, 2016 (L.I. 2243). This 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.
He said, “a well-thought and tailor-made policy will be needed to address this challenge while considering the likely international consensus to be adopted to deal with it.”