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Opinions of Friday, 25 November 2022

Columnist: Samuel Supremo Mensa

VAT has been increased by 2.5%

The writer, Supremo Mensa The writer, Supremo Mensa

Effectively, Total VAT (standard) will now be 21.9%. This will be a big blow to Retailers and Wholesalers whose annual sales (turnover) exceed Ghs500,000. Retailers and Wholesalers within this threshold are mandated to add an effective rate of 21.9% to all their Vatable products. However, all Retailers and Wholesalers whose annual sales fall between Ghs200,000 and Ghs500,000 are mandated to apply a VAT Flat rate of 4% to all taxable supplies. For the purpose of this analysis.

Large Suppliers are Firms with annual sales above Ghs500,000 whereas Small Suppliers are Firms with annual sales between Ghs200,000 and Ghs500,000.
Should both buy from a distributor or producer at same cost of say Ghs1,000.00, and both apply equal profit markups of say 15% to arrive at their selling prices? Their selling prices will be as follows:

1. Large Suppliers Ghs1,369.00

2. Small Suppliers Ghs1,190.00

This is simply an economics turned head down since in effect, large suppliers will be seen by consumers to be very expensive compared to small suppliers something so illogical to the field of economics. Meanwhile, both suppliers earn the same profit with VAT payable to government marking the difference.

Governance by these NPP economic crooks looks so unattractive now. Everything seems not to work yet every single decision taken adds to our hardship more. All in all, imagine the small supplier buying from the large supplier which is the likely event considering Ghana's market space. What will happen is that the small supplier be it retail or wholesale will bear the 21.9% and will then add the 4% rendering the final selling price to have a 25.9% total VAT taxable on same commodity.

As I have always said, the main problem in this current finance ministry is wisdom crisis.