The Gambia Revenue Authority (GRA) and stakeholders in business have validated the draft document of the Value Added Tax (VAT) seeking to replace the existing Sales Tax in order to prepare for its coming into force on the first day of the New Year 2013. The validation, which was held a fortnight ago at the Ocean Bay Hotel in Bakau, had drawn officials from the national tax authority, British High Commission as well as economic operators who are involved in different forms of business activity in the country.
The document was presented by Mr. Ensa Jallow, GRA Commissioner for Domestic Tax, and was scrutinized by stakeholders from the business community.
In his presentation, the Domestic Tax Commissioner explained why the VAT is introduced. He said its implementation is part of the tax reforms embarked upon by ECOWAS member states and the country's Public Finance Management (PFM) reforms. He noted that the Gambia has undertaken to implement VAT by January 2013 in fulfillment of its commitment under the ECOWAS VAT Protocol.
The objective of this new tax regime, according to the GRA Domestic Tax Commissioner, is to ensure that all ECOWAS countries will harmonize their tax systems, including the introduction to replace the sales tax in the Gambia.
He said VAT is a modern indirect tax levied on the consumption of taxable supplies of goods and services at various stages of their production and distribution and on imports. VAT, he continued, is a more broad based consumption tax than the current Sales Tax, adding that it is good for the promotion of domestic and international competitiveness.
On who pays for the VAT, Mr. Jallow said it is paid by consumers of taxable goods and services such as imports and taxes applied at multiple stages during production and distribution and also by all consumers, including government bodies.
Expounding on how the assessment is to done, the GRA Commissioner of Domestic Tax said VAT operates on self assessment which means that registrants are required to self assess their VAT liabilities and submit their VAT returns.
On exemptions, Mr. Jallow said basic foods are exempted. The aim, he said, is not to tax foods that are the staple diet of the poor. He added that the exemption is essential for raw foods and those that have undergone simple preparation and prevention, e.g. cleaned and frozen fish. He listed some of the exempted goods as Rice, Flour, Sugar, Cooking Oil, and Sal, Meat, Fish, Vegetables, Fruit and Breads.
He noted that the total tax collected is determined by tax treatment of "last" supply i.e. when goods and services are supplied to the end user and if the purchaser is a registrant, then they will usually able to claim a credit for the VAT paid. He added that if the purchaser is not registered, e.g. consumer or small business person, then the credit will not be credited.
He also elaborated on the issues such as how VAT works for businesses, consumers and on examples of taxable services for the shipping industry, hotel industry, reentrance, construction industry, VAT application for fuel distribution, VAT distribution for Embassies and NGOs, general Compliance pay and Rental income Tax.