Dr Cassiel Ato Forson, Finance Minister, says the government will undertake a comprehensive Value Added Tax (VAT) reforms this year to review distortions and 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 said.
The Finance Minister said Ghana’s VAT rate is about 22 per cent due to the addition of the GETFund Levy of 2.5 per cent, National Health Insurance Levy (NHIL) of 2.5 per cent and COVID-19 Levy of 1 per cent.
Presenting the government’s 2025 Budget Statement and Economic Policy to Parliament, Tuesday, March 11, he said the levies had added to the base for the final determination of the VAT rate of 15 per cent.
Dr Ato Forson also said that aside the high VAT rate, businesses were not permitted by law to claim their input for the NHIL, GETFund Levy and COVID-19 Levy, compounding the burden on households.
He said the government requested technical assistance from the Fiscal Affairs Department of IMF on VAT reforms and that the IMF Mission would commence in April 2025.
“The recommendations from the Technical 48 Assistance Mission are expected to inform our VAT reforms,” the Finance Minister, also the MP for Ajumako Enyan Essiam, said.
He said he would inaugurate a VAT Reform Task Force to hold broader consultation with key stakeholders for their inputs ahead of the IMF Technical Assistance Mission.
Dr Ato Baah Forson said the parameters for the VAT reforms which would be completed this year, would include abolishing the COVID-19 Levy, reversing the decoupling of GETFund and NHIL from the VAT and reducing the effective VAT rate for households and businesses.
Other parameters include reversing the VAT flat rate regime, upwardly adjusting the VAT registration threshold to exempt micro and small businesses from the collection of VAT and improving compliance through public education and awareness.
Prior to the delivery of the Budget Statement, the business community had raised concerns about the huge burden Ghana’s tax regime places on business and called for a one-stop-shop tax structure.
Whilst some business people call for using tax exemptions sparingly and strategically to support key sectors that drive industrialisation and job creation, others argued for strengthening tax transparency and revenue generation systems.
GNA