Finance Minister Unveils VAT Reform Task Force to Overhaul Tax System

Finance Minister Dr. Cassiel Ato Forson has revealed plans to create a VAT Reform Task Force aimed at overhauling Ghana’s Value Added Tax (VAT) system.

The task force will focus on addressing distortions in the current tax structure, reducing the burden on businesses and households, and streamlining the VAT regime.

In his presentation of the 2025 Budget in Parliament on Tuesday, Dr. Forson emphasized the government’s commitment to comprehensive VAT reforms, promising to review the existing system to tackle its inefficiencies.

“We commit to the people of Ghana and the business community that we will undertake comprehensive VAT reforms this year to review the current distortions and cascading structure of the VAT regime,” he said.

Currently, Ghana’s VAT system includes a 15% base VAT rate, with an additional 2.5% GETFund Levy, 2.5% National Health Insurance Levy (NHIL), and 1% COVID-19 Levy, bringing the effective rate to 22%.

However, businesses are not able to claim input VAT on these levies, compounding the tax burden on both businesses and consumers.

Dr. Forson described the current VAT system as inefficient, blending VAT and sales tax principles while using multiple tax rates.

To resolve these issues, the government has sought technical assistance from the International Monetary Fund’s Fiscal Affairs Department.

An IMF mission is expected to begin work on the VAT reforms in April 2025.

The reforms are expected to cover six key areas: abolishing the COVID-19 levy, reintroducing VAT to the GETFund and NHIL, reducing the effective VAT rate, reversing the VAT flat rate regime, increasing the VAT registration threshold to exempt micro and small businesses, and enhancing VAT compliance through public education.

Dr. Forson reassured Parliament that the VAT Reform Task Force would hold consultations with key stakeholders before finalizing the reforms, ensuring that the views of the business community and other interested parties are taken into account.