DETECTING AND REDUCING VAT FRAUD IN GHANA

BOADU AYEBOAFO

Abstract


ABSTRACT

This paper explores the various schemes used by taxable persons and VAT officers to perpetrate frauds that lead to loss of tax revenue and makes recommendations for reducing the opportunities for VAT fraud.  Semi-structured interviews were conducted with VAT Administrators and taxable persons to ascertain their views on the common avenues that are used to perpetrate VAT fraud. The paper ascertained that the common means used by taxable persons and tax officers to perpetrate VAT fraud include falsification of records in order to file understated VAT returns, under-invoicing, misclassification of goods, fraudulent collaboration between VAT officers and taxable persons and smuggling. The paper also found out that Ghana Revenue Authority does not have efficient system to detect most of the VAT frauds and that the few defaulters who are caught offer bribes to the Tax inspectors to stop them from reporting them for appropriate penalties to be charged on them. The paper makes recommendations that could be implemented to reduce the incidence of VAT Fraud in Ghana.  These include the establishment of tax tribunal to facilitate enforcement of penalties against defaulters; establishment of an efficient verification and audit system, making policy changes to limit cash transactions and establishing efficient border controls to reduce the incidence of under-invoicing and smuggling

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