Using VAT and Social Security Data in Compiling Economic Statistics in Ghana By Magnus Ebo Duncan

Responsibility of VATS The Value Added Tax Service (VATS) has responsibility for the administration and management of the Value Added Tax (VAT) by Act 546. These responsibilities include the collection of and accounting for the tax and its related penalties and interest payable. Customs, Excise and preventive Service (CEPS) collect import VAT for and on behalf of the Commissioner for VAT as agents and “for that purpose the laws and regulations applicable to collection of custom duties and other taxes on importation of goods” are applicable. In return, the VATS has agency for the collection of Domestic Excise Duty for the CEPS Commissioner.

Responsibility of VATS The VAT Service is one of the three revenue institutions established under the Ghana Revenue Agency (GRA) for the collection of taxes. It is therefore responsible to the Minister of Finance just as the other two revenue institutions, namely, the Internal Revenue Service (IRS) and Customs, Excise and Preventive Service (CEPS).

Powers of VAT Service As part of the operational responsibilities to ensure that VAT collected is properly accounted for, the Service has the mandate and powers including entry at any reasonable time, into the premises of a VAT registered business to inspect and take stock of any goods and examine business records, accounts and correspondences in the premises where the service has reasonable grounds to suspect that the premises contain taxable goods on which taxes have been evaded or fraudulently over claimed or evidence of failure to taxes legally.

The Service also has the power to seal off premises, if there are reasonable grounds to suspect that taxes have not been paid or a false claim for repayment has been made. The Service has an operational manual for collecting and accounting for the Value Added Tax

Eligibility to collect VAT All establishments whose annual turnover is above or equal to 10,000 Ghana Cedis (GH¢ 10,000) are to charge VAT of 15%

Details of VAT data Tax Identification Number (TIN) Name of company ISIC Sector Tax period (month) Tax year Output Output VAT Local inputs Local input VAT Imported inputs Imported inputs VAT Exemptions Deduct input Total payment due

Number of establishments covered

The coloured activities are those whose data are used

Sampling of establishments For compilation of economic statistics, the selection of establishments was done based on: -consistency in the establishment’s payments of VAT collection -turnover level set by the Statistical Service for each activity Note: The output of the selected establishments are used as indicators

Use of the VAT data The main use of the VAT data is the compilation of the national accounts The data is also used to compile value indices for some activities

Example of the use of VAT data for compiling indices in manufacturing

Advantages of using VAT data Virtually no cost on data collection to the Statistical Office It is a quick way of getting data, which helps in timely provision of information It helps in updating the business register

Disadvantages of using VAT data Limited information on the production structure of establishments Does not cover activities that are exempted from VAT

The Social Security and National Insurance Trust (SSNIT) SSNIT is a statutory public Trust charged with the administration of Ghana's National Pension Scheme. The Trust is currently the largest non-bank financial institution in the country. The primary responsibility is to replace part of lost income due to Old Age, Invalidity, or loss of life.

Coverage of SSNIT as at April 2010 The total number of registered active establishments nationwide - 32,977 The total number of registered active contributors nationwide - 891,082

Nature of contributions Employer pays 12.5% of workers’ gross salary on behalf of the workers towards pension The worker contributes 5% of his/her salary towards pension Total worker contribution is 17.5% of gross salary

Making the data useful for economic statistics SSNIT is prohibited by law to give personal information to third parties The Statistical Service came into terms with SSNIT to allow the former to give ISIC codes to all registered establishments, so that information could be provided in aggregated form (ISIC level 2) The coded establishments were given to SSNIT to compile monthly contributions and total contributors by ISIC

Computing average earnings by activity Since contribution per worker is 17.5% of gross salary, total contributions are raised to arrive at gross salary. Thus, and

Weaknesses of the method a. It overlooks allowances and in-kind payments b. A weighted average in this instance will give a better reflection than a simple average c. Only the formal sector is covered d. Contract and casual workers are not covered