Ghana’s VAT system is seen as ‘distorted’ and needs reform to aid Ghanaians and businesses, according to Finance Minister Dr. Ato Forson. He cites the highest effective VAT rate in Africa, highlighting its inefficiencies. The government aims for a transparent review in 2025, seeking stakeholder engagement to alleviate burdens on consumers and improve tax compliance.
Ghana’s Finance Minister, Dr. Cassiel Ato Forson, has labeled the nation’s Value Added Tax (VAT) system as “distorted,” indicating a pressing necessity for reform to alleviate pressure on Ghanaians and local businesses. During a recent interview on Joy News’ PM Express on March 11, following his presentation of the 2025 Budget Statement, he emphasized that reforming VAT is pivotal to rectifying the country’s tax inefficiencies.
Dr. Forson noted that Ghana’s effective VAT rate stands at approximately 21.9%, the highest in Africa, with Morocco following at about 20%. This disparity highlights critical issues within the VAT system, which he claims has numerous layers of inefficiencies that complicate processes for both businesses and consumers.
He explained that the current VAT setup suffers from a mix of sales tax and VAT elements, resulting in a convoluted and inconsistent system comprising flat rates and standard rates. Such complexity has garnered criticism from experts and industry participants, who argue that it discourages compliance and imposes an excessive financial burden on consumers.
As the government plans to consult stakeholders regarding VAT reform, the potential implications of these changes on prices, economic activity, and tax adherence will be closely monitored by both businesses and consumers. Dr. Forson pointed out that the present form of VAT fails to function effectively as a consumption tax, which should minimize burdens on businesses and prevent double taxation.
The Minister committed to a thorough review of the VAT system in 2025, emphasizing the importance of a transparent and inclusive approach. This marks a significant policy shift under the Mahama administration, which has focused on reducing the tax burden while improving revenue collection efficiency.
In summary, Finance Minister Dr. Ato Forson has identified the urgent need for reform in Ghana’s VAT system to address inefficiencies and provide relief to Ghanaians and businesses. The high effective VAT rate compared to other African countries, combined with a complex structure, places undue burdens on consumers and hinders economic growth. The government is set to engage stakeholders to ensure these reforms are beneficial and transparent as they move towards a comprehensive review in 2025.
Original Source: www.myjoyonline.com
