Government to overhaul VAT system with new reform task force

Finance Minister Dr. Cassiel Ato Forson has unveiled plans to establish a Value Added Tax (VAT) Reform Task Force aimed at overhauling Ghana’s VAT system to ease financial pressure on businesses and households while simplifying tax policies.

Announcing the initiative during his presentation of the 2025 Budget in Parliament on Tuesday, March 11, Dr. Forson emphasized the government's commitment to addressing inefficiencies and structural issues within the current VAT framework.

"We are dedicated to implementing extensive VAT reforms this year to correct existing distortions and enhance the efficiency of the system," he stated, assuring both the public and business sector of meaningful changes ahead.

Challenges with the Current VAT System

Ghana’s effective VAT rate currently stands at 22%, which includes a 15% base rate along with additional levies such as the 2.5% GETFund Levy, 2.5% National Health Insurance Levy (NHIL), and 1% COVID-19 Levy. However, businesses are unable to reclaim input VAT on the NHIL, GETFund Levy, and COVID-19 Levy, further increasing their tax burden.

Dr. Forson pointed out that the existing system is complex and inefficient, blending elements of both VAT and sales tax, and incorporating multiple tax rates that create unnecessary complications for businesses.

Proposed Reforms and IMF Collaboration

To address these issues, the government has sought technical assistance from the International Monetary Fund (IMF), with experts from the IMF’s Fiscal Affairs Department set to arrive in April 2025 to support the reform process.

In anticipation of their recommendations, Dr. Forson outlined six major areas the VAT reforms will focus on:

1. Eliminating the COVID-19 Levy to reduce the tax burden.
2. Reintegrating GETFund and NHIL into VAT to streamline tax calculations.
3. Lowering the effective VAT rate for businesses and households.
4. Abolishing the VAT flat rate system to enhance fairness.
5. Increasing the VAT registration threshold to exempt micro and small businesses from VAT obligations.
6. Strengthening VAT compliance efforts through education and public awareness initiatives.

Stakeholder Engagement for Inclusive Reform

Dr. Forson assured that the VAT Reform Task Force will engage extensively with businesses, tax experts, and other key stakeholders to ensure that the final policy changes reflect the needs and concerns of all parties.

This reform initiative is expected to bring much-needed relief to businesses while promoting a more efficient and transparent tax system that supports economic growth.