The Ghana National Chamber of Commerce and Industry (GNCCI) says the government’s overhaul of the Value Added Tax (VAT) system marks the end of years of frustration for local businesses.
Chief Executive Officer, Mark Badu Aboagye, explained that the business community has advocated for this reform for nearly four years and is relieved that it has finally been implemented.
“Largely, this has been one of our major concerns for the past three to four years. In every budget cycle, one of our key inputs has been a call for VAT reform,” he said.
He noted that businesses were encouraged when the government first announced plans for a reform last year.
“We were happy when it was announced last year that we were going to see a reformation and possibly a reduction in the effective VAT rate,” he explained.
However, that initial excitement soon faded as a full year passed without any concrete changes. For him, the latest budget finally brings the needed closure.
“Unfortunately, it took almost a year, but with this budget, we have now seen the actual reform. So we are happy about it. I believe one of our major challenges has been resolved.”
Mr. Badu Aboagye said the impact on businesses will be immediate because the previous system was overly complicated and difficult for many to navigate.
“For our members, the complaint was largely about the complexity,” he noted. “The structure itself was a stumbling block. It was a VAT system where the Standard VAT was combined with straight-line levies. In fact, the computation was a challenge for most of our members not because they didn’t want to pay, but because calculating it was difficult.”
He added that businesses were further burdened because key levies became direct costs.
“We have said repeatedly that the straight-line levies translated into direct costs. The NHIL, the GETFund levy, and the COVID-19 levy were all charges for which no input VAT could be claimed. So they became direct costs to businesses,” he said.
He believes the new consolidated VAT structure marks a major shift.
“Now that these levies have been consolidated into the Standard VAT, businesses can claim input VAT on them. This means they no longer serve as direct costs to businesses,” he emphasized.
While price effects will become clear over time, he says the system is now far more transparent.
“From here, we will consider how the reform affects prices. But for now, the system has been simplified. When you pay your 20%, you know exactly how to calculate your output VAT, your input VAT, and how to make the necessary deductions before paying what is due to the government.”
