Ahead of the presentation of the 2025 Budget Statement and Economic Policy to Parliament, the Ghana Union of Traders Association (GUTA) is expecting a comprehensive restructuring of the Value Added Tax (VAT) system.
President of GUTA, Dr. Joseph Obeng says traders have been bemoaning the overly complex, burdensome, exorbitant nature of the current VAT regime. The situation, he says, is one of the factors that discourages compliance, especially for businesses in the informal sector.
In an interview with The High Street Journal ahead of the budget, Dr. Joseph Obeng described the current regime of VAT as very cumbersome hence the need for simplification and streamlining.
Currently, the VAT system comprises a standard rate of 15%, with an additional 2.5% NHIL (National Health Insurance Levy), 2.5% GETFund (Ghana Education Trust Fund) Levy, and a 1% COVID-19 Levy, bringing the effective VAT rate to 21% for businesses under the standard VAT scheme.
However, small businesses with an annual turnover below GHC 500,000 fall under the 3% VAT Flat Rate Scheme (VFRS), which does not allow for input tax deductions.
This structure, according to GUTA, complicates tax compliance and creates an uneven playing field between small traders and larger businesses.
The traders are therefore convinced that by simplifying VAT and making it more predictable, the government will not only reduce the compliance burden on businesses but also unlock the full revenue potential of the tax system.
Dr. Obeng pointed out that the current tiered structure, where larger manufacturing entities opt for the standard rate to claim tax refunds while smaller businesses are subject to varying rates, leads to inconsistencies and discrimination in the tax system. He argued that a simplified, uniform VAT policy would not only enhance compliance but also boost government revenue by broadening the tax base.
“We want especially the VAT to be restructured to make it more simplified, affordable and uniform. It is very important. Normally for the informal sector, it is always good for the flat rate system. You know, most times the more formalised ones, the bigger manufacturing entities, they want the standard rate where they can go for the refund. So what I want is that the uniformity of it. And then also we do away with all the thresholds so that the tax should be paid by all without any discrimination based on the thresholds that define what one should pay,” he told The High Street Journal.
He added: “It is very important that we do not discriminate based on somebody’s threshold of turnover. It does not help. When we use the turnover thresholds, it means that there will be abuse. And people will want to abuse the system. So we have to make it more uniform and ensure parity and fairness for all.”
GUTA is also expecting the abolishment of some nuisance taxes which are detrimental to businesses as promised by the government. These taxes include the controversial E-levy, COVID-19 Levy, Special Import Levy, among others.
Moreover, for their members engaged in the importation of spare parts, GUTA says they expect the implementation of fixed duties for spare parts importation to reduce the cost of parts. This, Dr. Obeng says, was one of the promises of the NDC to the business community, hence they are in high spirits of its implementation through the 2025 budget.
“We are also expecting the government to implement the fixed duties for spare parts imports as the President promised. So that’s what we are expecting the implementation,” Dr. GUTA added.
As the government prepares to present the 2025 Budget to Parliament tomorrow, GUTA and other stakeholders will be watching closely to see whether their concerns are addressed.
For GUTA, a fair, transparent, and easy-to-comply-with VAT system remains a top priority for the sustainability of businesses and national economic growth.
