The Government of Ghana is poised to implement long-promised reforms to the Value Added Tax (VAT) system starting September 2025, with the aim of simplifying the structure to improve compliance and reduce tax-related burdens on businesses and individuals.
Sources close to the government say that ongoing consultations with the International Monetary Fund (IMF) have paved the way for the reforms, which are expected to address long-standing grievances over the complexity and perceived inequities in the current VAT regime.
VAT was initially introduced in Ghana in the mid-1990s but was withdrawn following massive public resistance. It was later reintroduced at a reduced rate but has since evolved into a more complex system, with various levies including the controversial COVID-19 levy, layered into its computation. The result has been a rise in the effective tax rate beyond what is stated, leading to growing dissatisfaction among taxpayers.
While in opposition, the current administration pledged to scrap the COVID-19 levy. However, after taking office, it indicated that such a move required IMF approval as part of broader fiscal restructuring efforts. Although the full details of the upcoming VAT reform are not yet public, expectations are high that the levy may be removed, and a more user-friendly flat rate VAT system could be introduced, especially for small and medium-sized enterprises.
At a recent book launch on VAT, Presidential Advisor on the Economy and former Finance Minister Seth Terkper emphasized the urgent need for a simpler VAT structure. He noted that although VAT rates had increased in recent years, Ghana’s tax-to-GDP ratio had not improved significantly, a sign, he argued, that the current complex system is undermining compliance.
“A simplified VAT system will encourage more businesses to comply voluntarily, expand the tax net, and ultimately help boost revenue without overburdening honest taxpayers,” Mr. Terkper said.
The expected reforms come at a critical time, as Ghana seeks to rebuild public trust in its tax system and improve domestic revenue mobilization under its ongoing IMF-supported recovery program. If properly implemented, the new VAT structure could not only ease the administrative burden on businesses but also enhance overall tax compliance, critical for sustaining public services, infrastructure development, and economic resilience.
With the third quarter of 2025 fast approaching, businesses and consumers alike are watching closely, hoping for reforms that balance fiscal responsibility with fairness and simplicity.
