The Ministry of Finance has released a report reviewing Ghana’s Value Added Tax (VAT) structure, in collaboration with researchers from the Institute for Fiscal Studies (UK).
Titled A Review of Ghana’s VAT System, the report analyzes the design and administration of Ghana’s VAT and associated levies, as well as revenue trends over time.
A statement from the Finance Ministry noted that the report draws on VAT policy principles, international best practices, and detailed tax data to assess the system’s effectiveness.
Key Findings
- Ghana’s VAT system is progressive, as exemptions on basic foodstuffs ease the burden on poorer households. However, wealthier households benefit more in cash terms from some exemptions, prompting a government review under the Medium-Term Revenue Strategy (MTRS).
- Many businesses below the VAT registration threshold voluntarily register, while others above the threshold fail to comply. Some registered taxpayers also file zero sales and purchases, highlighting the need for improved enforcement and voluntary compliance measures.
- The restriction of the VAT Flat Rate Scheme (VFRS) in 2023 to only small taxpayers has likely boosted tax revenues and targeted administrative benefits to those who need them most.
- Economic growth in the late 2010s, led by investment and exports rather than consumption, limited VAT revenue growth despite increases in tax rates.
The findings from the report have already influenced tax policymaking in Ghana and are guiding reforms under the MTRS. The government is also considering further policy and administrative changes based on the report’s recommendations.
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