According to the Ghana Revenue Authority (GRA), Ghana has been losing revenue due to the country’s inability to appropriately tax profitable online-based businesses. This has been attributed to the absence of specific tax laws that regulates the sector as well as accurate database of all online businesses that are operational in the country or offer services to the Ghanaian public.
The world over, great significance and benefits can be ascribed to digital revolution as it has been recognised for its role in transforming economies, models of businesses, and the livelihoods of people. These benefits, though welcoming, also introduce in their wake the debate on how best to tax and standardize digital businesses to optimize economic and societal outcomes. And as the world economies are fast drifting from physical to digital assets where most businesses have now embraced online transactions and have incorporated e-commerce, and even cyptocurrencies in their daily activities, the discussion of digital taxation becomes more pressing now than ever. This is because the impact of digitalization transcends every aspect of a country’s economy including its tax base and ability to increase revenues.
The 2018 digital economy report by the Organisation for Economic Co-operation Development (OECD) for instance, predicts a radical decrease in revenue mobilization as it foresees the depleting of lots of existing tax avenues due to digitization. Since e-commerce doesn’t take place in the physical space with most current tax rules not creating room as well for proper profiling of online companies, most governments are unable to tax them. This makes it an issue of a global revenue loss and concern which requires a global consensus. Problems with taxation of the digital economy are not peculiar to Ghana hence the need for global collaboration for the establishment of common international tax principles to guide and promote economic productivity and global prosperity. Pending a global consensus however, Ghana must apply interim measures aimed at identifying value creation and develop a consistent tax policy to address them.
A case in point is a consideration of the calls by local tax experts to expand the “Permanent Establishment” concept under the Income Tax Act, 2015 (Act 896) to embrace the provision of services in relation to e-commerce as well as refer to Value Added Tax (VAT), 2013 (ACT 870) for a possible working definition. For tax purposes, a company is deemed to be a permanent establishment if it is registered under the Companies Act or management and control of the company is exercised in Ghana. The GRA should come up with innovative ways to identify and effectively address this challenge to forestall future revenue losses.