Accra: Dr. Cassiel Ato Forson, Finance Minister, has announced that the government will initiate comprehensive reforms of the Value Added Tax (VAT) system this year to address existing distortions and the cascading structure of the regime. 'Mr Speaker, our VAT regime has been distorted and rendered inefficient. It combines both VAT and sales tax principles with a flat rate, standard rate, and levies,' he stated.
According to Ghana News Agency, the Finance Minister highlighted that Ghana's VAT rate effectively reaches about 22 percent, due to the inclusion of the GETFund Levy of 2.5 percent, National Health Insurance Levy (NHIL) of 2.5 percent, and a COVID-19 Levy of 1 percent. Presenting the government's 2025 Budget Statement and Economic Policy to Parliament, Dr. Forson explained that these levies contribute to the base for the final determination of the 15 percent VAT rate.
Dr. Ato Forson further noted that, aside from the high VAT rate, businesses are legally unable to claim input credits for the NHIL, GETFund Levy, and COVID-19 Levy, which exacerbates the financial burden on households. The government has sought technical assistance from the Fiscal Affairs Department of the International Monetary Fund (IMF) on VAT reforms, with an IMF Mission scheduled to begin in April 2025.
'The recommendations from the Technical Assistance Mission are expected to inform our VAT reforms,' said Dr. Forson, who is also the Member of Parliament for Ajumako Enyan Essiam. He plans to inaugurate a VAT Reform Task Force to engage in broader consultations with key stakeholders to gather their input ahead of the IMF Technical Assistance Mission.
Dr. Ato Baah Forson outlined the parameters for the VAT reforms, which are expected to be completed within the year. These parameters include abolishing the COVID-19 Levy, reversing the separation of GETFund and NHIL from the VAT, and reducing the effective VAT rate for households and businesses. Other measures include reversing the VAT flat rate regime, increasing the VAT registration threshold to exempt micro and small businesses from VAT collection, and enhancing compliance through public education and awareness initiatives.
Before the delivery of the Budget Statement, the business community expressed concerns about the heavy tax burden imposed by Ghana's current tax system, advocating for a streamlined, one-stop-shop tax structure. While some business leaders call for strategic use of tax exemptions to support sectors that drive industrialization and job creation, others emphasize the need for improved tax transparency and revenue generation systems.
