In a move aimed at bolstering revenue and taxing digital platforms, the government of Ghana has implemented a 21 percent Value Added Tax (VAT) on advertisements run on the social media giant, Facebook. The new charge is set to take effect from August 1, 2023, and will apply to both business and personal advertisements.
Government’s Broader Strategy to Increase Tax Revenue
The announcement was made by Meta, the parent company of Facebook, which is now required to levy VAT charges on all ad sales to advertisers, irrespective of whether the ads are for business or personal purposes. This development is part of the government’s broader strategy to increase tax revenue and target e-commerce and digital platforms for taxation.
Under this new VAT scheme, advertisers with a business presence in Ghana will be subject to a combination of taxes, including 2.5 percent National Health Insurance Levy (NHIL), 2.5 percent Ghana Education Trust Fund (GETFUND) Levy, a one percent COVID-19 Levy, in addition to the original 15 percent VAT charge.
An email notification sent out by Meta Business stated, “Meta is required to charge VAT levies on the sale of ads to advertisers, regardless of whether you’re buying ads for business or personal purposes.” The email also informed advertisers that if they are registered for VAT and provide their name, address, and VAT ID, this information will be displayed on their ads receipts. This measure aims to assist VAT-registered businesses in Ghana in recovering any VAT they may have paid to the Ghana Revenue Authority, if eligible.
Fair Contribution from the Booming Digital Advertising Industry
The decision to impose a VAT on Facebook advertisements aligns with the government’s efforts to broaden the tax base and ensure a fair contribution from the booming digital advertising industry. As the use of social media platforms for marketing and advertising continues to rise, the move is expected to generate substantial revenue for the country.
In response to the announcement, businesses and advertisers operating in Ghana are encouraged to familiarize themselves with the new VAT regulations and promptly update their billing and accounting systems to comply with the upcoming changes. Advertisers should also be aware of their VAT registration status to facilitate the recovery of any applicable VAT charges.
Overall, this move by the Ghanaian government represents a significant step in adapting tax policies to the evolving landscape of digital commerce while maximizing revenue generation for the country’s development and public welfare programs.