Accra: Mr Seth Terkper, the Advisor on the Economy to the President, has called for a simplified tax system, including Value Added Tax (VAT), for Ghana, cautioning against distortions in the country's main tax pillars. The former National VAT Coordinator and Minister of Finance emphasized that simplifying the country's VAT, along with income tax, excise tax, and import duty-the four pillars of the country's tax system-would enhance compliance and increase revenue.
According to Ghana News Agency, Mr Terkper made these remarks at the launch of his book, 'Value Added Tax in Africa: The Ghana Experience,' in Accra. The book launch comes as the government plans to undertake a comprehensive VAT system revision, expected in September this year. Mr Terkper highlighted that the current effective VAT rate of approximately 22 percent is often distorted by levies that mimic the main taxes, undermining VAT's integrity and affecting the country's ability to boost its tax-to-GDP ratio.
A survey conducted in 2024 by the Ministry of Finance, in collaboration with TaxDev researchers from the Institute for Fiscal Studies (UK), revealed that Ghana's tax-to-GDP ratio stood at 13.8 percent in 2022, falling short of the government's target of 18-20 percent by 2027. Mr Terkper stressed that allowing the tax system's pillars to function properly is crucial to avoid revenue distortion, which can lead to insufficient funds for expenditure, borrowing, and debt.
In response to a question from the Ghana News Agency, Mr Terkper acknowledged the inevitability of introducing some levies due to economic developments, such as the COVID-19 pandemic. He suggested relying on mechanisms like the Stabilisation Fund during difficult times to avoid the temptation of introducing new taxes, which complicate administration and compliance.
Mr Julius Debrah, the Chief of Staff, praised Mr Terkper for his insightful work, highlighting its value to tax practitioners and students. He called for a national initiative to reform the tax system and increase compliance. Mr Debrah also expressed concern about the methods employed by some Ghana Revenue Authority (GRA) officials in tax administration, urging increased public education to foster tax compliance.
Mr Abeku Gyan-Quansah, Partner, Tax Services, PricewaterhouseCoopers (PwC) and reviewer of the book, noted that it addresses the political and economic aspects of VAT as well as its institutional journey, making it a comprehensive resource. He described the book launch as timely, coinciding with the upcoming review of the country's VAT system. Mr Gyan-Quansah emphasized that the book offers valuable lessons for both Ghana and Africa, urging bold steps towards VAT reform for sustainability.
