A while ago, parliament passed the VAT amendment Bill into law subject to presidential assent.

The budget, and the bill, which was prepared by the government and laid before parliament, seeks to abolish VAT on financial services which include non-life insurance and professional services in the nature of accountancy, investment and legal services.

But unfortunately, the Minister of Finance changed his position in parliament to exclude professional services in the nature of accountancy, investment, legal services and non-life insurance contracts from the exempted provisions. Simply put, it is only aspects of the VAT on financial services that have been abolished and not the entire provision.

Financial services companies that perform functions like accountancy, investment, legal services and non-life insurance contracts will still be subject to Value Added Tax.

What saddens me is that the budget statement STATED CATEGORICALLY that government was abolishing the entire VAT provisions on all financial services. So why this deceit Mr Minister; who are you deceiving?

Why change a policy document that has already gone through cabinet approval?

Secondly, the new Act seeks to amend the Value Added Tax regime and to mandate a taxable person who is a retailer or wholesaler for tax payable to a flat rate of 3%. Yet again, the inconsistencies are glaring.

Contrary to previous commentaries by the Minister of Finance during the Budget reading and debate that the government is going to give some tax reliefs by reducing the VAT rate from 17.1/2% to 3%, this has not reflected since a flat rate of 3% is numerically equivalent to the 171/2% VAT that allows the taxable person to net off his/her input and output VAT.

Again, we were told by the Minister of Finance that the revenue implication for the amendment is neutral, which means that the government is not giving a taxable person who falls under this bracket any relief and that the government is only seeking to make it simpler for a taxable person to pay his/her taxes.

But best practice has taught us that countries with concessions on a flat rate with retailers do not extend those concessions to wholesalers and manufacturers except cottage industries like Akpeteshie distillers, gari processing industries and palm oil industries.

Indeed, wholesalers are not in the informal sector, and, therefore, by granting them a flat rate, you end up breaking the VAT compliance chain which is key to the Value Added Tax regime.

It is assumed that since the threshold for VAT registration is GHS200,000, every taxable person whose invoices are above the threshold is capable of keeping records, and what this amendment has done is to exempt wholesalers/retailers from keeping records which will eventually breed inefficiency and non-compliance in filling.

The strength of tax administration is the availability of good books of account since the tax administrator may be using the filling details of a taxable person not only to access the VAT but also to access corporate and personal income tax.

The issue of simplicity is, therefore, defeated if this policy is going to end up breeding inefficiency, noncompliance, or poor records keeping, which will also breed corruption and tax evasion in the revenue administration.

Though the amendment seeks to classify both retailers and wholesalers under flat rate regime, the supplier of power, heat, refrigeration and ventilation have been conveniently excluded, all because there may be revenue losses associated with this.

Why should others be exempted if the policy was to exclude all? In my opinion, this makes the new VAT regime arbitrary and unfair.