Government to undertake comprehensive VAT reforms in 2025 -Dr Ato Forson

The Minister of Finance, Dr Cassiel Ato Forson, has announced that the government will implement comprehensive Value Added Tax (VAT) reforms this year to address distortions and the cascading structure of the current VAT regime.

Presenting the 2025 Financial Budget to Parliament, he explained that Ghana’s effective VAT rate is approximately 22 per cent due to the inclusion of the GETFund Levy (2.5 per cent), National Health Insurance Levy (NHIL) (2.5 per cent), and COVID-19 Levy (1 per cent) on the base VAT rate of 15 per cent.

"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," he stated.

Dr Forson noted that the country’s VAT system has become inefficient, combining elements of VAT and sales tax principles with a mix of flat rates, standard rates, and levies.

To address these challenges, he revealed that the Ministry of Finance has requested technical assistance from the Fiscal Affairs Department of the International Monetary Fund (IMF) for VAT reforms, with an IMF mission expected to begin in April 2025.

Ahead of this, he announced the establishment of a VAT Reform Task Force to consult key stakeholders and gather input for the proposed changes.

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

The VAT reforms, which will be completed this year, will include, abolishing the COVID-19 Levy, reversing the decoupling of GETFund and NHIL from VAT and reversing the VAT flat rate regime.

Dr Forson emphasised that these reforms are expected to enhance efficiency, reduce the tax burden on businesses and households, and streamline the VAT structure for better compliance and revenue mobilisation.