News Guide Africa

Tag: Value Added Tax (VAT)

  • Reformed VAT Bill passed as COVID-19 Levy and others abolished

    Reformed VAT Bill passed as COVID-19 Levy and others abolished

    Ghana’s Parliament has passed the Value Added Tax (VAT) Bill, 2025, marking a significant overhaul of the country’s VAT regime.

    The new law replaces the existing flat-rate system with a unified structure, aiming to simplify the tax framework and improve clarity, consistency, and legal certainty.

    However, some stakeholders, like the Ghana Union of Traders Associations (GUTA), have raised concerns about potential unfair competition and market distortions.

    “The reforms will make compliance easier, not harder, and will not introduce new tax burdens on businesses or consumers”, Deputy Finance Minister, Thomas Nyarko Ampem, said while dismissing these concerns.

    The reforms fulfil a major pledge announced by the government in the 2025 Budget and Mid-Year Fiscal Policy Review to make Ghana’s VAT system fairer, simpler, and more growth-focused.

    The Finance Minister, Dr Cassiel Ato Forson, who led the policy revisions, said the new legislation will remove distortions, reduce cascading effects, promote compliance, and improve economic efficiency for businesses and households.

    “We promised to abolish the COVID-19 levy. With the support of this House, I am happy to announce today that it is abolished,” Dr Forson declared on the floor of Parliament.

    Under the new VAT structure, the COVID-19 levy is removed entirely and is expected to return GH¢3.7 billion to individuals and businesses in 2026 alone.

    The bill also abolishes the decoupling of the Ghana Education Trust Fund (GETFund) and the National Health Insurance Levy (NHIL) from the VAT base, meaning both are now eligible for input tax deductions, a change projected to reduce the cost of doing business by about 5 per cent.

    The government says that cumulatively, the full reform package will give back nearly GH¢6 billion to the Ghanaian economy.

    Other approved measures under the VAT Bill include:

    • Abolition of VAT on mineral reconnaissance and prospecting, aimed at reviving exploration investment and reversing years of stagnation in greenfield development.

    • Reduction of the effective VAT rate from 21.9 per cent to 20 per cent.

    • Increase in the VAT registration threshold from GH¢200,000 to GH¢750,000, relieving thousands of micro and small enterprises from mandatory VAT compliance.

    • Extension of zero-rated VAT on locally manufactured textiles to December 2028, protecting more than 2,000 jobs and enhancing competitiveness in the domestic garment market.

    According to the Finance Minister, the previous taxation threshold had eroded significantly in real value since 2015, forcing many micro-businesses into VAT registration and raising administrative costs.

    The new threshold, he said, restores fairness and frees small enterprises to grow without heavy compliance burdens.

    Dr Forson emphasised that the VAT overhaul goes beyond tax adjustments, positioning Ghana for a digitally enhanced revenue future.

    The rollout will introduce Fiscal Electronic Devices (FEDs) to track taxable transactions, digital VAT collection on cross-border e-commerce, and a new VAT reward scheme encouraging consumers to demand receipts and help police compliance.

    The government believes these interventions will boost investor confidence, support local industry, and stimulate job creation, particularly in mining and textiles, where policy distortions have long restricted growth.

    “These reforms mark a turning point in Ghana’s value-added tax administration,” the Finance Minister said. “This is not just a tax reform, it is a step toward a more just, predictable, and business-friendly economy.”

    The Ghana Revenue Authority has begun a nationwide sensitisation campaign ahead of implementation, ensuring businesses and consumers are fully prepared for the transition.

    The passage of the VAT Bill, 2025, signals a decisive shift in Ghana’s tax policy, one aimed at easing the cost of doing business, empowering industry, and anchoring long-term fiscal stability.

    Demands for broader dialogue on new VAT reforms

    Meanwhile, the Africa Centre for Tax Policy Research (ACTOR) is calling for a structured dialogue between the Ghana Union of Traders Associations (GUTA), the Ministry of Finance, and the Ghana Revenue Authority (GRA) over the government’s new VAT reforms and the planned rollout of Artificial Intelligence (AI) systems at the ports.

    GUTA has raised concerns that the new VAT threshold of GH¢750,000, which requires businesses exceeding it to pay 20% VAT, could create unfair competition, splitting the market between traders who charge VAT and those who do not.

    Reacting to the call in a statement issued on 24th November, 2025, the policy think tank, ACTOR, said the threshold is not ‘a sudden hike but a return to the long-standing real value of VAT entry points when Ghana’s volatile exchange rate is considered.’

    The think tank explained that VAT thresholds exist in Ghana and globally to protect small businesses and allow tax authorities to focus on medium and large taxpayers who generate the most revenue.

    ACTOR noted that the dollar value of the threshold has remained stable over the years, with the proposed GH¢750,000 roughly equivalent to USD 62,500 within historical ranges. Their analysis also showed the real price difference between VAT-registered and non-registered traders is about 1.5%.

    The think tank also disagreed with GUTA’s suggestion that all traders should be allowed to opt into the Modified Tax System (MTS), saying thresholds cannot be optional without risking system collapse. The MTS, ACTOR stressed, is meant only for micro and small businesses below the VAT threshold.

    While defending the reform, ACTOR acknowledged traders’ concerns and urged the GRA to strengthen monitoring and turnover verification to prevent VAT evasion.

    The group concluded that strong collaboration among stakeholders is key to a smooth rollout, minimising market distortions and building trust in the tax system.

     

    By Adnan Adams Mohammed

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

  • VAT Reforms: traders clash with gov’t over unfair system

    VAT Reforms: traders clash with gov’t over unfair system

    Ghana’s Value Added Tax (VAT) reforms have sparked intense debate, with the Ghana Union of Traders’ Associations (GUTA) warning of devastating consequences for small and medium enterprises (SMEs).

    But the government and Deloitte see it as a welcome move to ease tax burdens and stimulate investment. The sudden shift from a 4% flat rate to a 20% VAT has raised concerns about market distortion, with GUTA arguing that it will create an uneven playing field for traders.

    The new threshold of GH¢750,000 is expected to segregate traders, with those above the threshold charging 20% VAT and those below charging nothing. This, GUTA warns, will lead to higher prices for consumers and loss of business for affected traders. The Union is calling for a modified tax system that ensures parity and promotes compliance. In a statement issued last week, GUTA’s First Deputy Secretary General, Richard Amamoo, said the Union is observing “with grave concern” the challenges that will emerge from the new regime.

    “Two traders dealing in the same products in the same market will now be treated differently,” Amamoo explained. “One will charge 20% VAT because their turnover crosses the threshold, while the other, with lower turnover, will charge nothing.”

    GUTA fears that customers will simply go to the trader without VAT, leaving the other at a huge disadvantage. The Union is calling for a modified tax system that ensures parity, promoting compliance and reducing the risk of non-compliance fueled by pressure and imbalance.

    He said GUTA “acknowledges and welcomes measures aimed at enhancing tax compliance and improving revenue collection,” but stressed that the reforms come with serious unintended consequences.

    On the other hand, Deloitte believes the VAT reforms will reduce the effective VAT rate, easing the tax burden on businesses and stimulating investment. The government aims to simplify VAT administration, strengthen compliance, reduce the tax burden on businesses, and support job creation.

    The professional services firm, in its analysis of the 2026 National Budget stated that it will closely monitor the implementation of the 24-Hour Economy initiative and the Accelerated Export Development Programme, which collectively aim to unlock productivity, expand export capacity, and drive inclusive growth.

    “For the business community and consumers, the proposed reform to the Value Added Tax (VAT) regime is welcome news. Implementation of the reforms is expected to reduce the effective VAT rate to 20% from 21.9%. These reforms are expected to ease the tax burden on businesses, stimulate investment, and support job creation”.

    The Minister for Finance, Dr. Cassiel Ato Forson, who presented the 2026 Budget Statement and Economic Policy of the Government of Ghana for the next financial year to Parliament, outlined the government’s agenda to transition from stabilisation to transformation.

    Key policy measures announced include further strengthening of domestic revenue mobilisation, continued rationalisation of public expenditure, and a renewed commitment to fiscal discipline.

    The Ghana Revenue Authority (GRA) is pushing for a January 1, 2026, rollout, pending parliamentary approval. With technical and operational mechanisms in place, the GRA is confident in a smooth transition.

    Commissioner-General Anthony Sarpong, speaking at the PwC Post-Budget Forum in Accra, said the Authority is “fully prepared” to roll out the changes at the beginning of the new year”. indicating that, early approval is crucial to ensuring a smooth transition into the new system, which aims to simplify VAT administration, strengthen compliance, and reduce the tax burden on businesses.

    He explained that Parliament has already commenced deliberations on the VAT Amendment Bill, and the GRA is hopeful that lawmakers will give the green light before Christmas.

    “We are expecting Parliamentary approval before Christmas, and once that is secured, we are ready for January 1 [2026],” he said.

    He added that the GRA has been engaging the Ministry of Finance and other stakeholders to ensure that the full set of reforms, ranging from adjustments to the VAT structure to enhanced digital invoicing systems, can be implemented without delays.

    The Commissioner-General also stressed the importance of public sensitisation and said the GRA will intensify education campaigns immediately after Parliament gives approval.

    He said this is necessary to ensure that taxpayers understand the new rules, especially the changes to invoicing, compliance timelines, and the responsibilities of VAT-registered businesses, while he assured industry players that the GRA will maintain open dialogue throughout the rollout period, promising prompt responses to concerns that may arise once the reforms take effect.

    “Our goal is to make the transition as seamless as possible for both businesses and consumers,” he added.

    The VAT reforms are part of Ghana’s broader strategy to modernize the tax system, improve revenue mobilization, and support economic recovery. While there are concerns, the government is committed to making the transition as seamless as possible for businesses and consumers.

    However, questions remain about the impact on SMEs and the economy. Will the VAT reforms cripple SMEs, or will they provide a much-needed boost to Ghana’s economic growth? The answer lies in the government’s ability to balance revenue mobilization with business-friendly policies.

    As the debate continues, stakeholders are urging the government to consider the potential consequences and ensure a fair and equitable tax system. The success of the VAT reforms hinges on effective implementation and ongoing dialogue with businesses and traders.

     

    By Adnan Adams Mohammed

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

  • Retail sales, VAT collections jump over 30% in first five months of 2025

    Retail sales, VAT collections jump over 30% in first five months of 2025

    Domestic VAT collections for the first five months of 2025 rose by 33.6% to GH¢8.31 billion, compared to GH¢6.22 billion recorded during the same period in 2024

    That’s according to the Bank of Ghana’s July Monetary Policy Report, which also points to solid growth in retail sales over the same period.

    This signals stronger consumer demand and improved tax compliance.

    The report shows that retail sales increased by 35.7% cumulatively between January and May 2025, highlighting growing household spending and recovery in private consumption.

    On a year-on-year basis, sales for May alone rose 38.6% to GH¢277.62 million, from GH¢200.27 million in May 2024. Month-on-month, retail activity improved by 4.6 percent, moving from GH¢265.46 million in April to GH¢277.62 million in May.

    Domestic VAT collections also saw a robust performance in May, rising 30.1 percent year-on-year to GH¢1.77 billion. This can be attributed to the upward trend in both VAT and retail sales to enhanced economic activity, stronger consumer confidence, and improved tax administration.

    According to the data, the uptick in consumer spending reflects a gradual rebound in domestic demand, supported by stable prices and moderate growth in disposable incomes.

    However, market watchers believe that sustaining this positive momentum will depend on maintaining fiscal discipline, curbing inflationary pressures, and strengthening policy measures to support household purchasing power.

  • VAT reforms: GRA targets September 2025 to finalise report ahead of 2026 budget

    The Ghana Revenue Authority (GRA) has announced that it is on course to complete work on the proposed Value Added Tax (VAT) reforms by September 2025.

    The reforms, which aim to address longstanding distortions in the VAT system, are expected to be incorporated into the government’s 2026 economic policy and national budget.

    Speaking after a stakeholder engagement in Accra, Commissioner of Domestic Revenue at the GRA, Edward Apenteng Gyamera, revealed that the authority is currently undertaking a nationwide consultation process to solicit feedback from key players in the trade and business sectors.

    “This is part of the process to get every stakeholder’s input on the upcoming VAT reform by the Ministry of Finance.

    In all, we have four engagements in Accra and others in Kumasi, Takoradi, and Tamale before releasing the final draft in the next few weeks,” he explained.

    “We should also bear in mind that these are just proposals and not final decisions.”

    The VAT reform was initiated by the Ministry of Finance in response to concerns about inefficiencies and complications in the current payment system, which has been in place for over a decade.

    Mr. Gyamera assured stakeholders that their contributions would be seriously considered and explained that, where specific proposals cannot be adopted, clear justifications will be provided.

    The overarching goal of the reform is to broaden the tax base and boost VAT’s share of domestic revenue by over 20%, enhancing Ghana’s fiscal stability and economic resilience.

    Earlier this year, the International Monetary Fund (IMF) provided technical assistance to the government and the Ministry of Finance to support the reform process.

    According to the GRA, the IMF’s recommendations will be thoroughly reviewed before any final decisions are made.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

  • IMF, key stakeholders to determine improved new VAT system

    Adnan Adams Mohammed

    The government, through the finance ministry, is taking a consultative approach towards plausible tax reforms, especially with regards to the Value Added Tax (VAT).

    The Ministry, in its quest to improve the framework underpinning the current VAT system, has approached the International Monetary Fund, tax experts and the business community for technical input towards reducing the VAT rate which is effectively 22%..

    With the help of a VAT Reform Taskforce, yet to be inaugurated by the Minister of Finance, to coordinate the consultation process, the President John Mahama administration has reiterated its commitment towards ensuring the protection of businesses to create job opportunities while saving individual consumers from the cascading effect of rigid tax systems.

    “Mr. Speaker, we commit to the people of Ghana and the business community that we will undertake comprehensive Value Added Tax (VAT) reforms this year with the aim to review the current distortions and cascading structure of the VAT regime”, Dr Cassiel Ato Forson, Finance Minister told Parliament last week when presenting the government’s 2025 budget statement and economic policies.

    Currently, Ghana’s effective VAT rate is about 22 percent with is 700 basis ponts above the stated rate of 15%. This is because GET Fund Levy of 2.5 percent, National Health Insurance Levy (NHIL) of 2.5 percent and COVID-19 Levy of 1 percent are all added to the base for the final determination of the VAT stated rate of 15%.

    Aside from the high VAT rate, businesses are not permitted by law to claim their input for the NHIL, GETFund Levy and COVID-19 Levy, compounding the burden on households.

    Prior to the budget reading, the President of the Ghana Union of Traders Association (GUTA), Dr. Joseph Obeng, called for a restructuring of the Value Added Tax (VAT) system. It is instructive that, the current inordinately high effective rate and complex structure is not encouraging compliance and is therefore negatively impacting the state’s tax revenue collection as well as the finances of compliant businesses.

    He stressed the need for tax cuts and a streamlined tax system, with special emphasis on VAT, explaining that the current VAT system is complex and burdensome.

    “The way VAT is structured is not ensuring compliance. It’s not helping businesses. We want VAT to be made simpler, more affordable, and uniform. It should be restructured,” Dr Obeng had said in a radio interview on Monday, March 10, the day before the 2025 budget was presented.

    Also, some tax experts had also highlighted the need for urgent reforms to Ghana’s Value Added Tax (VAT) system, which has become overly complex and hinders business operations, before the budget was presented.

    A tax lecturer at University of Ghana and consultant, Prof Abdallah Ali-Nakyea, in a recent interview, noted the positive implications of decoupling strict levies from the VAT system, which has significantly impacted business operations and compliance.

    He urged the government on the need for stricter enforcement and clearer guidelines to ensure that VAT invoices are consistently issued, thereby reducing discrepancies and increasing overall tax compliance.

    “We still have businesses and traders asking whether you want a VAT invoice or not. This practice poses a significant challenge and contributes to what is known as the tax gap,” he said.

    Subsequently, Tax Partner at Price Waterhouse Coopers (PwC), Abeku Gyan-Quansah, has also noted that the current VAT system in Ghana has multiple different rates and categories, ranging from 0 to 15 percent. He believes the complexity is a major cause for businesses not being tax compliant, ultimately costing the government revenue.

    “The VAT system is troubling. Why should we have a law that at a minimum, excluding levies, should have about six different rates, which I guess probably a number of you have not paid particular attention to? The law has 0%, 3%, 5%, 12.5%, 15%, and 7% percent withholding VAT rates.

    “Of course, I am not saying they all apply at the same time on all transactions but it creates complexities, which are very difficult to do business with,” he said.

    Consequently, the Finance Minister has acknowledged that, “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 declared the government’s commitment to reform the VAT system.

    “Mr. Speaker, we have currently requested Technical Assistance from the Fiscal Affairs Department of IMF on VAT reforms. It is expected that the IMF Mission will commence in April 2025. The recommendations from the Technical Assistance Mission are expected to inform our VAT reforms.

    “.Ahead of the IMF Technical Assistance Mission, I will inaugurate a VAT Reform Task Force to hold broad consultations with key stakeholders for their inputs.

    “Mr. Speaker, the parameters for the VAT reforms will include: abolishing the COVID-19 Levy; reversing the decoupling of GETFund and NHIL from the VAT; reducing the effective VAT rate for households and busineses; 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.”