Value Added Tax flat rate scheme for retailers in the Cape Coast metropolis

Abstract

The purpose of the study was to examine the VAT flat rate scheme for retail businesses in Cape Coast Metropolis. Specifically, the study focused on the VAT flat rate scheme on sales of retail products. Again, the study dealt with the level of VAT flat rate compliance by the retailers. The study further identified the major challenges faced by both the retailers and the service in the implementation and the administration of the scheme in the Cape Coast Metropolis. The descriptive survey design was used. The stratified random sampling procedure was used to select 125 respondents made up of 120 retail business operators and 5 VAT officials in the study area. Information was obtained from primary source using questionnaires and interview guide. The analyses of collected data were presented using cross tabulation, frequency and percentage distributions. The findings from the study show that most retailers prepare VAT account only when demanded because they sometimes regard the VAT collected as part of their sales revenue; hence they feel that what they pay to the Domestic Tax Revenue Division of Ghana Revenue Authority is regarded as tax slapped on them. Also, retailers’ compliance level to the VAT Act (Act, 870) was found to be below expectation. It has boosted their sales. However, VFRS has increased the work load and labour cost of their business leading to reduction in profit. Based on the key findings and conclusions of this study, it is recommended to the management of the VAT section of Ghana Revenue Agencies to ensure that VAT Flat Rate Scheme is redesigned to operate like the standard VAT rate where input tax is reclaimable.