VAT Compliance Challenges in Ghana and How to Address Them

The government of Ghana replaced Sales and Services Tax with Value Added Tax (VAT)) in March 1998 with the aim of widening the tax net and improving the efficiency of tax administration. It has been 17 years since VAT was introduced in Ghana, but the VAT systems have not achieved most of its objectives due to many compliance challenges. VAT strives on voluntary compliance and accurate bookkeeping because VAT is self-assessed. This paper examines the various compliance challenges facing VAT administration in Ghana and makes recommendations for improving voluntary compliance and efficient VAT administration. Semi-structured interviews were conducted with VAT Administrators and taxable persons to ascertain their perceptions on the major challenges confronting compliance and how best to address them. The study found out that VAT compliance is low partly because VAT registration and filing procedures are too complex for the small traders. Also most businesses fail to keep proper books of accounts on which accurate VAT assessment could be done. In addition many taxpayers fail to comply because they have negative perception about how the government uses tax revenue. The paper makes many recommendations that could be implemented to improve VAT compliance in Ghana. These include implementation of electronic VAT registers; simplification of VAT registration and filing procedures, decentralization and ensuring regular VAT Audits.