The Finance Minister, Dr Cassiel Ato Forson, has stated that urgent reforms are needed to address the distortions in the country’s Value-Added Tax (VAT) system.
Speaking at the commencement of the dialogue on Monday, 3rd March 2025, he said “Currently, the VAT system has been distorted, leading to very little compliance.
“The VAT gap is huge. Last year, the Ghana Revenue Authority (GRA) had planned to increase VAT revenue by 32%, but unfortunately, they only managed to achieve 17%, which is clearly below inflation. This should tell us that there is a significant problem,” he said.
He continued, emphasising the fiscal cost of taxes and the need for rationalisation, while mitigating the impact on the poor.
The Tax Assumptions Act of 2022 set out clear criteria and guidance. However, subsequent legislation introduced further tax incentives that deviate from the national tax benchmark.
Assumptions related to VAT, Personal Income Tax (PIT), and import duties are estimated to generate a loss of about 3.9% of GDP. This figure does not include corporate income taxes,” he explained.
He added, “While these assumptions were intended to provide some relief, they are costly. They create leakages, increase complexity, and distort the overall tax system.”
He also identified that the largest source of lost revenue from VAT comes from the exemption on the supply of land, which accounts for 33% of the overall cost.
“To be frank, VAT on dwellings and VAT on real estate was introduced in 2022 by the previous administration. However, as we approached the 2024 elections, they decided to abandon it. The truth is, the tax still exists but was abandoned after the elections. This alone means we have to close the gap immediately,” he noted.
He concluded by stressing “the urgent need for VAT reform to improve revenue mobilisation and ensure fairness across all sectors of the economy”
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Source: JoyNews
