Value Added Tax
Administration In The
Construction Industry
In Ghana
Dadson Awunyo-Vitor
Department of Agricultural Economics and Agribusiness, Kwame Nkrumah University of Science and Technology, Ghana
Address for correspondence:- [email protected]
Journal of Finance and Management in Public Services. Volume 14. Number 2
Abstract
The objective of the study is to assess the level of awareness of contractors and consultants
within the construction industry about Value Added Tax (VAT) and challenges of its administration or implementations within the industry. Data was collected from 52 contractors
and 8 consultants in Brong Ahafo Region of Ghana using questionnaires. Descriptive statistics were used to analyse the data. The study revealed that a large proportion (75%) of the
respondents were aware of the need to register and charge Value Added Tax as a result of
sensitisation workshops organised by Ghana Revenue Authority in the region. The consultants perceive the implementation of the Value Added Tax as important in national development, however, they see the registration process as cumbersome. Contractors also had a
good perception about Value Added Tax implementation within the construction industry
but believed that they need more education about the modalities of registration and payment. The study further revealed that the state lost GH¢ 8,053,407.52 ($5,033,379.70) in the
2012 fiscal year due to non-compliance with Value Added Tax by contractors and consultants in the region. In order to improve the implementation of Value Added Tax within the
construction industry Ghana Revenue Authority must intensify education of contractors on
modalities of registration and payment. In addition issuance of the tax identification number should be decentralised in order to facilitate registration and eliminate unnecessary
bureaucracy. The Registrar Generals’ Department should also encourage contractors to
register for Value Added Tax upon registration of their company. Sanctions for non-registration and compliance of Value Added Tax should be actively enforced.
Key words: Value Added Tax, Construction Industry, Brong Ahafo, Ghana Revenue Authority
Introduction
The generation of income through tax is essential for every nation’s development. Tax revenue provides funds to support government business in all nations. Silvani and Baer (1997)
noted that most African states are always in deficit with respect to their budget because
about 60% of potential tax in these countries goes untapped. As a result, most of the countries in Africa have to depend on donor funds to support their budget (World Bank, 2005).
However, with dwindling donor funds there is the need for an effective tax administration
system. According to Hadler (2000) African countries can increase their tax revenue by
30% through efficient tax administrative systems. Therefore, most African states, including
Ghana, are making considerable effort to expand the tax net and also improve tax administration systems. An example in 1998 was the introduction of Value Added Tax in order to
expand the tax net and improve tax revenue to support the business of government. Value
Added Tax was established by VAT Act which replaced the sales tax legislation that was
deemed to be too narrow in generating the needed revenue. The contribution of VAT to
government revenue over the years has seen a steady increase from 5% to 18%. The introduction of VAT was a very controversial issue. The tax was introduced in 1995 but had to
be repealed because of implementation challenges. These challenges included inadequate
education of the public about VAT system [Osei, (2000)]. VAT rate of 17.5% was deemed too
high because the sales tax rate which VAT replaced was 15% [Gray et al., (2001)].
After the draft act was tabled, Parliament set the bill aside and requested that VAT management team engage in a national education campaign to sensitise the population to the
objective of the tax. This is because the education which took place between May and
November 1994 was virtually ineffective because it lacked precision and the legal backing to
Journal of Finance and Management in Public Services. Volume 14. Number 2
prompt any serious interest among the general public. This has resulted in a delay in adoption of VAT legislation and regulation by parliament which adversely affected the preparation for the introduction of VAT. In addition the lack of precision on VAT rate did not give
business enough time to evaluate the effect of the new tax on the prices of their goods and
services Also, the Ministry of Finance and Economic planning was not able to stick to the
anticipated goods and services which would attract VAT. Furthermore, tax payers argued
that the tax applied to a wider range of products and services compared to repealed sales
tax. The above issues lead to civil unrest; consequently the Parliament passed two bills to
stop the implementation of VAT in June 1995 (World Bank, 2001; Osei, 2000). The sales tax
was reintroduced with the same rate, scope, and coverage as before.
The government reintroduced VAT at the end of 1998 as part of the Public Financial Management Reform Program, and with technical assistance from the U.K. Department for
International Development. This time VAT rate was lowered from 15% as indicated in the bill
to 10% after extensive consultations between Parliament and the executive branch.
Though the lower rate made revenue lower it increased public acceptance of the tax. Even
with the lower rate, revenue from VAT exceeded the targets set for the initial phase of its
operation. It also generated 20% more revenue than the sales tax it replaced. The government’s macroeconomic framework which aims to reduce trade taxes and gradually replace
them with broad based taxes such as VAT had seen increases in the role of VAT in the revenue system over the years - less than two years after VAT was reintroduced, its rate was
raised to 12.5%.
The government further broadened the tax base by cutting the registration threshold from
200 million to 100 million cedi.The flat rate scheme was also introduced to encourage small
and medium scale enterprises (SMEs) to register and charge VAT on their goods and services. This scheme is open to only retailers and SMEs whose average annual turnover is below
GH¢120,000. This scheme attracts a 3% flat rate on goods and services.
Since its inception the laws governing VAT placed an emphasis on goods and services and
not on construction; meanwhile those in the construction industry are capable of receiving
huge sums of monies as profit from central government, being the main client, upon completion of their projects. However, those businesses who supply goods and services (such as
petty traders, retailers, other contractors) to government institutions and consultants are
being asked to pay their VAT returns to the Domestic Tax Revenue Division of the Ghana
Revenue Authority by the middle of every month based on their revenue generation.
In order to broaden the tax base, reduce deficits and reduce over reliance on donor funds,
the national budget requires an improvement in revenue generation through taxation.
This calls for the expansion of the tax net and an efficient and effective tax administration
system; consequently tax reforms are needed to achieve the above goals. Hence additional
businesses have been included in the schedule to attract VAT, and one such business type is
works contracts.
This came into being as a result of the enactment of VAT Amendment Act 2002 (Act 629),
section 16(c) of Schedule 1 of VAT Act 1998(Act 546). In view of the above law [VAT Amendment Act 2002 (Act 629),] with effect from 1st January, 2012 works contracts are to attract
Value Added Tax (VAT) and the National Health Insurance Levy (NHIL), pursuant to VAT
Amendment Act, 2002 (Act 629). Therefore all contractors are to be registered to enable
Journal of Finance and Management in Public Services. Volume 14. Number 2
them to submit returns to the Domestic Tax Revenue Division of the Ghana Revenue Authority.
This means that Client/Users are to pay VAT and NHIL on works since the value has been
added to the material, equipment and labour inputs which constitute the components from
which the work is obtained as a finished product. Under this amendment, items which attract Value Added Tax in the construction industry include demolition, maintenance work
on building and roads as well as all costs associated with the construction of both roads
and buildings. Examples of other taxable items within the construction industry include:
installation of electrical fixtures; air-conditioners; communication equipment; sprinklers;
safety equipment; aluminum glazing; provision of landscaping services; main works and
roofing etc. Though the construction industry is very wide and made up of many parties,
the parties can be grouped into three broad groups: contractors (building contractors, road
contractors and sub-contractors), consultants, and clients.
The introduction of VAT in the construction industry is one of the reforms which aimed at
expanding the tax net and improving government revenue. However, the implementation
not yielded the desired results as most of the contractors and consultants within the industry are not registered for VAT (Sowa (2010). Hence there is the need to understand the implementation challenges of the tax in the construction industry in order to formulate policies to improve the registration and VAT payment by the actors within the industry. Thus
this study aimed at evaluating the implementation of Value Added Tax on the construction
industry in Ghana using the Brong Ahafo Region as a case study. Brong Ahafo Region was
selected because of access to data and information. The consultants and contractors have
regional and national associations and it is the Brong Ahafo regional association that has
agreed to participate in this study.
Related Literature
Concept of Taxation
Taxation is defined as “the levying of compulsory contributions by public authorities having
tax jurisdiction, to defray the cost of their activities” (Ali-Nakyea, 2008.) No specific reward is
earned by the tax payer; the money collected is used by the government for the production
and payment of goods and services, provision of infrastructure and maintenance of law and
order. Agyeman (2005) also defines taxation as “the demand by the central or local government for a compulsory payment of money by citizens of a country other than as payment
for some specific service or as a penalty for some specific offence”. Other benefits of taxation are to decrease inequalities arising from the distribution of wealth, to restrain certain
types of consumption (for example, alcoholic beverages and cigarettes), to protect home
industries, and to control certain aspects of the country’s economy.
Tax administration in Ghana has gone through a number of reforms like all other economies
in which it is applied. Tax administration in developing countries has, however, not been
effective due to some challenges it poses. According to Tanzi and Zee (2000), institutional
sustainability of an effective and efficient tax system in developing countries is not an easy
task as it faces several challenges. These challenges include the structure of the economy,
limited capacity of the tax administration, the poor quality of basic data, and the political
set up.
Journal of Finance and Management in Public Services. Volume 14. Number 2
Taxation administration in Ghana
Ghana has seen several tax administration instruments, ordinances and laws over the years.
In 1855, the colonial masters passed the first customs law which was replaced in 1878 by a
customer law which was developed in line with the United Kingdom’s Customs Law. In 1943,
income tax was introduced by the Income Tax Ordinance. Until 1998 the two institutions
which were in charge of tax administration in Ghana were the Internal Revenue Service
(IRS) and Custom Excise and Preventive Services. In 1998 the Value Added Tax Service was
added as the third institution for tax administration in Ghana.
The Internal Revenue Service and Customs Excise and Preventive Services were part of the
civil service until 1986. In 1986, PNDC Law 143 and PNDC Law 144 granted these institution
full operational autonomy and partial financial autonomy by abolishing the Revenue Department of the Ministry of Finance and establishing the National Revenue Secretariat. The
objective of the National Revenue Secretariat is to strengthen tax administration in Ghana
(Devas, 2001). The function of the Revenue Department of the Ministry of Finance was taken
over by the National Revenue Secretariat, and the Internal Revenue Service and Custom
Excise and Preventive Service was placed under the National Revenue Secretariat (Terkper,
1999; Osei, 2000)
In 1998 the National Revenue Secretariat was abolished and replaced by the Revenue Agencies Governing Board. The Revenue Agencies Governing Board (RAGB) was established by
an Act of Parliament that also increased the autonomy of the Internal Revenue Service, Custom Excise and Preventive Service and Value Added Tax Service. Though the three agencies
were overseen by the RAGB they operated independently of each other, and consequently
there was a duplication of services which increased operational costs hence the need to
create one integrated body (Terkper, 1999). However, constitutional requirements stood
in the way of creating one integrated, stand-alone revenue authority until 1998 when the
Ghana Revenue Authority (GRA) was established (Terkper, 1999; Atuguba, 2006). The Ghana
Revenue Authority comprises of two main divisions which oversee direct and indirect tax
in Ghana. These divisions are the Domestic Tax Division, which is made up of the Internal
Revenue Service and the Value Added Tax Service, and the Customs Division which is made
up of Customs Excise and Preventive Service.
Value Added Tax is a tax levied on the added value of a commodity and or services at various stages of production of the good or rendering of the services. It is levied on the value
added along different stages of production and distribution of a commodity or service. In
this sense, it is equivalent to a retail sales tax which would be collected only at the retail
stage (Shome and Spahn, 1996). The term “Value Added” according to VAT Act, 1994 (Act
486) of Ghana refers to an increase in the value of goods and services at each stage of production or transfer of goods and services. The tax is paid by the final consumer of the goods
and services. It is collected by the registered person at various stages of the production and
distribution process or services rendering process.
A tax credit is granted at every stage for tax paid in the chain of transfer or sale of goods
and services until it reaches the final consumer. Goods and services of a Value Added Tax
Registered person attract VAT. The tax is charged on the sales value of goods and services
of a registered person (Crawford et al., (2010). According to Pritchard (2009) “VAT is a tax on
consumers and is levied on the supplies of goods and services made by a taxable person in
Journal of Finance and Management in Public Services. Volume 14. Number 2
the course of furtherance of a business carried by him”. VAT Regulations (Legislative Instrument No.1598) were passed in Ghana by Parliament in February 1995. The instruments actually became effective in March 1995 after a 21-day statutory notification period.
The introduction of VAT became necessary in order to remedy the deficiencies in the tax
system in Ghana. These deficiencies included a narrow tax base which excluded sectors of
the economy, hence low reliance and unstable tax revenue and revenue leakages as a result
of weak tax collection system with inadequate checks and controls. For example, taxes on
domestic consumption in Ghana were generally imposed at the importation and manufacturing stage of production, and not extended through the retail stages. In addition the sales
tax was levied on goods albeit with numerous exemptions by the customs administration.
In preparation for the introduction of VAT, the government created a new agency to be
responsible for the collection of the new tax, the VAT Service. VAT Service recruited and
trained staff and developed a computerised information system to administer the tax. The
service was responsible for education, registration and collection of VAT. The VAT service
was merged with the Internal Revenue Service to form the Domestic tax division with the
establishment of the Ghana Revenue Authority (GRA) by an Act of Parliament, Act 2009 (Act
791).
The Construction Industry and Value Added Tax
The construction industry is very wide and made up of many parties. However, it can be
said that the construction industry comprises two main parties: contractors (building
contractors, road contractors and sub-contractors) and clients. The construction industry is governed by contracts which specify the terms and conditions agreed between the
parties. In the construction industry, the contractor can be said to be the supplier and the
client, the buyer. This is because in contractual terms, the client pays the contractor a sum
of money in consideration of work done. This equates to the contractor selling the work
done as goods to the client who pays for the cost of the completed work as if it were goods
bought.
The construction industry is very important in the economic development of Ghana. It supports job creation and employs both skilled and unskilled labour. For example employment
can be generated in the construction industry through physical infrastructural development. It also provides the needed infrastructure for other economic activities to take place.
It is well known that an active construction industry adds to growth of the economy. Before
the contractor can execute the work for the client he needs to the purchase materials, hire
equipment and hire labour. This is where the input tax comes in with respect to construction work to be done. The contractor is expected to charge a standard rate of 15%; which
comprises 12.5% Value Added Tax and 2.5% National Health Insurance Levy.
However, the law has largely been overlooked by a large proportion of the contractors
and consultants within the industry with only a few contractors and consultants charging
VAT, and the large majority yet to charge VAT. Sowa (2010) attributed the non-compliance
with the law by parties in the construction industry to implementation challenges. This
argument as emphasised by Blankson (2010) who noted that there is the need for GRA to
interact with the affected groups and individuals in the construction industry to identify
the implementation challenges of VAT and ensure proper understanding of issues. This
would help the authority to develop appropriate methodology including modalities and
Journal of Finance and Management in Public Services. Volume 14. Number 2
procedures for application of VAT within the construction industry in Ghana. A successful
implementation of VAT within the construction industry would not only improve revenue
for the country but it would also encourage other professionals such as lawyers, doctors
and accountants to pay tax.
Methodology
Sources of Data
The data for the study was predominantly primary data collected from contractors and
consultants who have registered their business with the Registrar General and are operating in the Brong Ahafo Region of Ghana. In all there were 60 registered contractors and
eight registered consultants within the region. In the case of the consultants, all them were
interviewed due to their small number. However,. in the case of the contractors the sample
size was determined by using an estimation method given by Bartlett et al. (2001).
n = N/1 + N(e)2
Where
n is the sample size;
e = error level;
e = 1 – confidence level; and
N is the total population of registered contractors.
Assuming 95% confidence level, e = 0.05 and an estimated 60 registered within the study
area as provided by the regional office of the Contractors Association, a sample size of 52
registered contractors were sampled for the study. The sample size for this research is 52
contractors and 8 consultants. A simple random sampling technique was used to select the
respondent consultants.
Questionnaire and interview guides were the main data collection instrument used. Questionnaires were administered to sampled contractors and the consultants. In addition managers of these firms were also interviewed using interview guides.
Analytical Framework
Descriptive statistics such as frequency tables and percentages were used to present the
socio–economic characteristics of respondents and their levels of awareness of Value
Added Tax Law. The Chi-square test was used to assess if there was an association between
educational level and VAT registration among the respondents. Kendall’s Coefficient of
Concordance (W) analysis was used to rank the items identified as constraints to the implementation of Value Added Tax by the respondents. The degree of agreement of the rankings
by the contractors and consultants was then measured. W ranges from 0 to 1. In deriving W,
let T represent the sum of ranks for each constraint being ranked. The variance of the sum
of ranks is given by:
[1]....
....
Where Var denotes variance and n denotes the number of constraints. The maximum variance of is given by
Journal of Finance and Management in Public Services. Volume 14. Number 2
[2]........
Where is the number of respondents. The formula for Kendall’s coefficient of concordance
is given by
[3]........
By simplifying equation 3 above result in the computational formula for as:
[4]........
In this study, n includes elements like cumbersome procedure, lack of tax personnel, lack
of understanding of the process, lack of education on the VAT process, bureaucratic procedures, and ignorance of VAT law. The hypotheses are that for the null hypothesis: (H0):
there is no agreement between the rankings of the constraints identified by the respondents, and the alternative hypothesis (H1): there is agreement between the rankings of the
constraints identified by the respondents. The hypothesis was tested for significance in
terms of the F distribution. Chi-square statistics were also used to test independence
between VAT registration and educational levels of the respondents and age of businesses
respectively. The value of the test-statistic was determined as follows:
[5]........
Where
X2 = Pearson test statistics
Oi= Observed frequency
Ei= Expected frequency
n = Number of cell in the table
The p-value was then used to assess if a significant relationship exists between these variables and VAT registration.
Results and Discussion
Demographic Characteristics of Respondents
The study revealed that the majority of the sample population for contractors were above
Journal of Finance and Management in Public Services. Volume 14. Number 2
42 years of age whilst half the numbers of the sample population for consultants were
between 37-42 years. Respondents from consulting firms were the youngest in the sample
study.
All the consultants had tertiary school education as against 44% of the contractors. 12% of
the contractors completed Junior High School. This implies that for one to be in a consultancy firm, he or she must have acquired a certain amount of education whilst the contractors mostly needed the required skills and knowledge. Almost all respondents were married
except for 4% of the contractors who were single.
Table 1: Socio-Economic Characteristics of the Respondents
Contractors
Frequency
%age
Age
25-30 years
0
0
31-36 years
12
24
37-42 years
2
4
Above 42 Years
37
72
Total
52
100
Educational Junior high school
12
level
6
Senior High school
23
44
Tertiary Institution
23
44
Total
52
100
Gender
Female
0
0
Male
52
100
Total
52
100
Marital Status Single
2
4
Married
50
96
Total
52
100
Consultants
Frequency
0
2
4
2
8
0
0
8
8
0
8
8
0
8
8
%age
25
25
50
25
100
0
0
100
100
5
95
100
0
100
100
Source: Field data, 2013
In all, 56% of the construction firms were registered as a sole proprietorship company
while 44% were registered as a limited liability company. Most of these contractors have
had considerable experience in the business. 80% of them have been in operation for
more than 5 years. Only 20% of them have had between 1-5 years’ experience in operation.
Most of the respondents are currently operating more than two sites. These contractors
composed of 19 road contractors, 35 building contractors, and 2 were into both road and
building construction. Classification of contractors in the construction industry is shown in
Table 2 below.
Table 2: Type of Licence Held by the Respondents’ Organisations
Class of licence
Frequency
Building Contractors
D1K1
9
D2K2
13
D3,K3
13
Road Contractors
A1B1
4
A3,B3
13
A4,B4
2
%age
25
37.5
37.5
22.2
66.7
11.1
Source: Field data, 2013
Some of the respondents indicated that there are laws governing VAT compliance in the
construction industry. This law differs from those applied in other businesses in that the
Journal of Finance and Management in Public Services. Volume 14. Number 2
Construction Levy Act 629 of 2002 amended Act 546 of 1998 which governs VAT and NHIL
now included the construction industry, therefore this amendment made construction taxable.
Figure 1: Respondents Level of Awareness of VAT
Source: Field data, 2013
Figure 1 above shows that all the consultants were aware of VAT law in the construction industry, 87.5% of the consultants indicated that they became aware of VAT law in the industry through Ghana Revenue Authority; and 12.5% became aware through other professional
bodies. This is an indication that awareness of the law among consultants is very high.
On other hand, 60% of the contractors were aware of the registration of VAT, whilst 40%
indicated they were not. Those who were aware indicated that they became aware through
consultants, Ghana Revenue Authority and contractors’ associations. More than half the
sample population confirmed their awareness of VAT in the construction industry.
Despite the high level of awareness of the respondents about VAT, the study revealed that
72% of the contractors had not registered with VAT because of lack of education and bad
collection systems. This was confirmed by the fact that 92% of the respondents indicated
their company have not been offered any training on the registration and modalities for
VAT. Although the regional office of the Ghana Revenue Authority is responsible for ensuring the implementation of VAT in the construction industry, the Tax Identification Number
(TIN) is issued in Accra. This is making their work difficult as they cannot track those who
have registered and those that have not registered.
Constraints Associated with the Implementation of Value Added Tax among Contractors in
the Construction Industry
The study identified three main constraints which influence the implementation of VAT
within the construction industry in Ghana. These are a lack of appropriate education on
Journal of Finance and Management in Public Services. Volume 14. Number 2
VAT by the tax authorities; bureaucratic procedure in registering for VAT and accessing
registration certificates, as well as procedures used to collect VAT from those who have
registered for VAT. The respondents were asked to rank these constraints and the result of
the ranking is presented in Table 3. The tests of significance in terms of F distribution of the
degree of agreement or concordance (W) between the rankings of the constraints to VAT
implementation within the construction industry in Ghana is fairly high, with above 60%
degrees of agreement between the rankings of the respondents. The study revealed that
the most important constraint in implementation of VAT in the construction industry is the
lack of education, followed by bureaucratic procedures. The least important constraint was
poor collection systems.
Table 3: Ranking of constraints identified by the respondents in the implementation of
VAT
Influencing factors (Constraints)
Lack of education
Bureaucratic procedure
Bad Collection systems
Number of respondents
Coefficient of Concordance (W)
Ranking
1
2
3
60
0.6375 (63.75%)
Source: Field data, 2013
This explains why respondents were requesting education on the modalities for VAT, and
could be a large part of their reasons for non-registration and non-compliance. Due to the
constraints associated with the implementation and compliance of VAT law in the construction industry, the study has revealed the amount lost by the state as these firms failed to
comply with VAT on the contracts awarded. These are summarised in the Table 4.
Table 4: Estimated sum of VAT unaccounted across selected districts in 2013
Districts
Contract Sum
Sunyani West District
1,033,282.90
Techiman Municipal
1,651,247.74
Kintampo Municipal
827,038.54
Jaman South
868,253.83
Nkoranza South Municipal
882,995.36
Total
5,262,818.37
Estimated sum of VAT unaccounted for across selected districts
Consultant
A
B
C
Total
Contract Sum
27,130,064.85
2,515,872.16
9,882,718.77
16,951,317.39
VAT(GH¢)
13,477,603
21,538,014
10,787,459
11,325,050
11,517,331
68,645,457
VAT(GH¢)
3,538,703.9
328,157.24
1,289,050.30
2,211,041.40
Source: Consultant Contract Document, 2013
Exchange rate as at December 2013: GH¢ 3.88=£1.00; GH¢ 2.3325=US$1
The state has lost a total amount of GH¢ 70,856,498.40 ($ 35,606,281 or £18,261,984.12 as at
December 2013) because of Consultants’ non-compliance with VAT on the projects awarded
Journal of Finance and Management in Public Services. Volume 14. Number 2
in 2012.
Dependency between VAT Registration and Educational Level of Respondents and Age of
Business
The results of the test of hypothesis are presented in Table 5. The Chi-square test of
dependency between educational levels of the respondents and VAT registration showed
Pearson Chi-square value of 0.048 with a p-value of 0.976. As the p-value is greater than
0.05, we therefore fail to reject the null hypothesis. This indicates that there is no significant relationship between educational level of the owners of the firms and registration for
VAT. This means that VAT registration is independent of the educational level of the owners of the firm. Thus for owners of construction firm to decide whether or not to register to
implement VAT does not depend on their educational level.
Table 5: Dependency of VAT registration on educational level of the respondents
Registered for VAT
Attributes
Chi-Square Value P-Value
Yes
NO
Educational level
Junior high school
2
4
0.048
0.976
Senior High school
6
16
Tertiary Institution
9
23
Age of Business
2.170
0.538
Less than 10 years
30
12
Above 10 years
13
5
Source: Field data, 2013
In order to test the dependency between VAT registration and age of the firm’s structure,
Chi-Square test was conducted. The test result showed a Chi-Square value of 2.170 and a
p-value of (0.538) for age of the firm (Table 5). Since the p-values are greater than 0.05, the
test fails to reject the null hypothesis, and indicates that VAT registration is independent of
the age of the firm.
Conclusion and Recommendation
The study revealed that awareness of Value Added Tax among contractors and consultants was high. The level of awareness of VAT among the respondents was created by the
Ghana Revenue Authority and other professional bodies. However; they need more education about the modalities of VAT to increase compliance in the construction industry in
Ghana. Despite the level of awareness of the respondents about VAT, a large proportion has
not registered for VAT because of lack of education and bad collection systems. This is the
major reason why most of them cited lack of education as the major constraint to VAT registration. Thus the staff of Ghana Revenue Authority should be equipped through training
programmes to be conversant with the amendment of VAT Act for effective administration
of the tax law. They should also intensify their education on VAT in the construction industry since respondents have high awareness but lack of education on the basic principles and
modalities for VAT. This would be most successful if the staff of GRA were taken through
regular training programmes on emerging issues within the sector they are operating.
The Ministry of Finance and Economic Planning should collaborate with the Ministry of
Housing and Road and Transport to ensure that state owned consulting firms in the region
Journal of Finance and Management in Public Services. Volume 14. Number 2
implement VAT law applicable to the construction industry. Also Value Added certificates
should be part of the tender requirements to ensure that contractors register before competing for any contract works within public institutions as it is being required from suppliers. The Ghana Revenue Authority must collaborate with the Registrar General’s Department so that as soon as the contractor registers a company a VAT taxpayer identification
number is issued. In the case of existing firms, information centres should be established
within the regions to facilitate the process of acquiring VAT certificates for those without
VAT registration numbers. Because the fact that the Ghana Revenue Authority has only one
Tax Identification Number (TIN) centre that is located in Accra, this makes the whole process cumbersome and as a consequence substantial delays are occurring in the system.
Journal of Finance and Management in Public Services. Volume 14. Number 2
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