The Ministry of Finance, in collaboration with the Institute for Fiscal Studies (IFS), UK, has published a comprehensive review of Ghana’s value-added tax (VAT) system, offering key insights into the country's tax design, administration, and revenue trends.
The report, which forms a crucial component of Ghana’s Medium-Term Revenue Strategy (MTRS), provides an in-depth analysis based on international VAT principles, comparative practices, and detailed local tax data.
It also outlines significant policy and administrative reforms aimed at boosting revenue collection and improving compliance.
Key Findings:
According to the report, Ghana’s VAT system is progressive, with richer households contributing a larger share of their expenditure through VAT than poorer households, primarily due to exemptions on basic foodstuffs.
However, the report highlights that wealthier households benefit more from these exemptions in cash terms.
The Finance Minister, Dr. Ato Forson, noted that the government is carefully reviewing the VAT exemptions to ensure they effectively support vulnerable groups while maximizing revenue collection.
“We are committed to ensuring that VAT exemptions serve their intended purpose and are not disproportionately benefiting wealthier households. This review is an integral part of our Medium-Term Revenue Strategy to drive sustainable growth,” said Dr. Forson.
The report also identified significant compliance challenges, including businesses operating above the VAT registration threshold but failing to register, and many registered taxpayers filing either no returns or ‘null’ returns.
Dr. Forson emphasized that strengthening enforcement and encouraging voluntary compliance will be pivotal under the MTRS.
Another notable reform cited in the report is the restriction of the VAT Flat Rate Scheme (VFRS) to small taxpayers, a measure introduced in 2023.
This adjustment is credited with boosting tax revenues while reducing administrative burdens for small businesses.
Additionally, the report noted that Ghana’s VAT revenues underperformed in the latter half of the 2010s despite overall economic growth, largely because the growth was driven by investment and exports, which are not subject to VAT.
Guiding Future Reforms
Dr. Ato Forson stressed that the insights from the report are already informing policy decisions and will guide future reforms under the MTRS.
“This report provides a roadmap for improving our VAT system, ensuring fairness, and enhancing revenue generation to support national development"
"We will continue to engage stakeholders to implement reforms that drive compliance and protect vulnerable populations,” he added.
The Finance Ministry stated that it remains committed to using evidence-based policies to strengthen revenue mobilization while fostering a business-friendly environment.
Story by: Joshua Kwabena Smith
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