A hardworking Ghanaian entrepreneur sits at their desk, crunching numbers, only to realize that once again, taxes are eating away at their profits. It’s a familiar frustration for many business owners across the country, and at the heart of the issue is Ghana’s Value Added Tax (VAT) system.
Businesses are urging the government to introduce a fairer, more transparent VAT structure. They argue that multiple embedded levies distort operations, leaving them with no option but to pass extra costs onto consumers. Instead, they are calling for an input-output VAT model, which would ensure businesses are taxed only on the value they add at each stage of production. This, they believe, will remove inefficiencies, create a level playing field, and ultimately reduce the burden on both businesses and consumers.
AGI President Dr. Humphrey Ayim-Darke didn’t hold back when addressing the issue. “If you want to implement a total VAT at 21%, then we say, do input-output. Don’t embed levies that distort operations. When you do that, businesses have no choice but to pass the cost on to consumers,” he explained on Joy News’ PM Express Business Edition on Thursday, February 20.
For many entrepreneurs, the current VAT system introduced by the previous government, feels like a puzzle with missing pieces. Business owners stress that the proposed 21% VAT rate, if not properly structured, will stifle growth, weaken competitiveness, and ultimately push prices higher for Ghanaians.
They argue that inconsistencies in how VAT is applied are making long-term planning difficult, especially for small and medium-sized enterprises (SMEs). Companies within the same sector, dealing with identical imports, are being subjected to different tax treatments, creating an unfair business environment.
AGI is championing a shift to an input-output VAT model, which ensures that businesses are taxed only on the value they add at each stage of production. This, they say, will remove inefficiencies and create a level playing field for industries.
In addition to the challenges posed by the current VAT structure, Ghanaian businesses are also grappling with high lending rates and persistent inflation, which further strain their operations.
As of February 2025, the Ghana Reference Rate stands at 29.96%, indicating the baseline interest rate for lending.
This high rate makes borrowing costly for businesses, particularly small and medium-sized enterprises (SMEs), limiting their ability to invest and expand.
On the inflation front, the country experienced a slight decrease, with the rate easing to 23.5% in January 2025 from 23.8% in December 2024.
Though this decline is a positive sign, the inflation rate remains elevated, affecting both consumer purchasing power and business costs. The combination of a complex VAT system, high lending rates, and significant inflation creates a challenging environment for Ghanaian businesses.
While acknowledging that the government has taken steps to eliminate certain taxes, such as COVID-19 levies and betting taxes, business leaders insist that VAT reform should be the top priority. Without it, they warn, businesses will struggle to remain competitive, and consumers will continue to suffer from increasing prices.
