By Adnan Adams Mohammed
The Ghana Revenue Authority (GRA) is pushing back against public anxiety regarding the newly passed VAT Act 2025 (Act 1151), asserting that the shift from a 4% flat rate to a 20% standard rate does not mandate a spike in the cost of living.
Dominic Adamnor Nartey, Chief Revenue Officer at the GRA’s Domestic Tax Revenue Division (Free Zones Unit), clarified that while the percentage on paper looks significantly higher, the underlying mechanics of the tax are designed to eliminate distortions not punish consumers.
Consolidating a “fragmented” system
During a radio discussion on Thursday, February 19, 2026, Mr. Nartey explained that the Ghanaian tax framework had become a “patchwork” of laws since its last major review in 2013. Over the past decade, constant amendments had left the system fragmented and difficult for both businesses and the GRA to navigate.
“Act 1151 has come to consolidate all the scattered amendments and simplify the system,” Mr. Nartey stated. “The Act was brought into existence because the last time we had a comprehensive review of VAT was 2013.”
Pricing vs. taxation
The core of the public debate centers on the transition from the 4% Flat Rate Scheme—often used by retailers and wholesalers—to the 20% Standard Rate. Traders argue this 16-point jump will make their goods uncompetitive, especially compared to unregistered businesses that do not charge VAT.
However, Mr. Nartey dismissed the idea that a higher rate automatically equals higher shelf prices. He argued that price hikes are often the result of business pricing decisions rather than the tax structure itself.
He noted that the standard VAT system allows businesses to claim “Input VAT” (tax paid on purchases), which prevents the “cascading effect” a situation where tax is charged on top of tax, artificially inflating the final price. Under a proper pricing model, the GRA insists the impact on the final consumer should be minimal.
“If you build your price according to what the GRA expects you to do, there is no difference [in the final price],” he added.
Leveling the playing field
The GRA acknowledged concerns that VAT-registered businesses are being undercut by unregistered competitors. To address this, the reform aims to streamline administration, thus making it easier for businesses to comply and file returns; correct distortions thus ensuring that the tax is applied transparently across the supply chain and enhance mobilization, thus strengthening Ghana’s domestic revenue base to reduce reliance on external borrowing.
As the public discussion continues, the GRA remains firm that Act 1151 is a necessary step toward a modern, efficient fiscal regime. The challenge now lies in ensuring that businesses adopt the “proper pricing methods” Mr. Nartey referenced to keep goods affordable for the average Ghanaian.
Fact vs. Myth:
Feature Old 4% Flat Rate System New 20% Standard Rate (Act 1151)
Input Tax Credit No. Businesses could not claim back VAT paid on their own purchases. Yes. Businesses deduct the VAT they paid (Input Tax) from the VAT they collect.
Tax on Tax High. Leads to “cascading,” where tax is added to a price that already includes tax. Low. The credit system ensures tax is only paid on the “Value Added” at each stage.
Price Impact Hidden in the cost of goods. Visible, but offset by the ability to recover costs.
Complexity High (due to fragmented amendments). Low. Consolidated into a single, streamlined legal framework.
The “Input credit” advantage
The primary reason the GRA argues that prices shouldn’t skyrocket is the Input-Output mechanism. Under the old 4% flat rate, that 4% became a “sunk cost” for the business, which they often passed directly to the consumer. Under the 20% standard rate, businesses can reclaim the VAT they paid to their suppliers.
For example, if a retailer buys an item for GH¢100 (plus GH¢20 VAT) and sells it for GH¢150, they collect GH¢30 in VAT. However, they only send GH¢10 to the GRA (GH¢30 collected minus the GH¢20 they already paid). This prevents the “cascading” effect that traditionally drives up shelf prices.
Next steps for the public
The GRA is expected to begin a series of nationwide sensitization workshops to teach small-to-medium enterprises (SMEs) how to adjust their accounting software for the new rate.
