Tax experts have emphasized the urgent need for reforms to Ghana’s Value Added Tax (VAT) system, which has become excessively complex and obstructs business operations.

During the launch of a recent World Bank report titled ‘Strengthening Domestic Revenue Systems for Fiscal Sustainability’ at the 8th Ghana Economic Update, Abeku Gyan-Quansah, a Tax Partner at PwC, noted that Ghana’s VAT system features a variety of rates and categories, ranging from 0 to 15 percent.

He pointed out that this complexity is creating challenges for businesses in adhering to tax regulations and is consequently leading to a loss of government revenue.

“The VAT system is troubling. Why should we have a law that at a minimum, excluding levies should have about six different rates, which I guess probably a number of you have not paid particular attention to? The law has a zero, 3, 5, 12.5, 15, and 7 percent withholding VAT rates. Of course, I am not saying they all apply at the same time on all transactions but it creates complexities, which are very difficult to do business with,” he said.

Exemptions Act of 2022

Mr. Gyan-Quansah highlighted the unutilized opportunities within the Exemptions Act of 2022. This law permits the government to acquire equity interests in companies that receive tax exemptions. He believes that effectively applying this provision could substantially enhance government revenue.

“The Exemptions Act provides a unique opportunity for the government to secure equity stakes in businesses benefiting from tax exemptions,” the speaker stated. “This approach could create a new revenue stream, fostering a more sustainable economic environment.”

The expert called on parliamentarians to ensure the proper implementation of this law, highlighting that it offers a balanced approach by supporting businesses while safeguarding government interests.

Regarding the issue of compliance Tax expert and consultant, Abdallah Ali-Nakyea said it is a persistent problem among businesses and traders.

He underscored the need for stricter enforcement and clearer guidelines to ensure that VAT invoices are consistently issued, thereby reducing discrepancies and increasing overall tax compliance.

“We still have businesses and traders asking whether you want a VAT invoice or not. This practice poses a significant challenge and contributes to what is known as the tax gap,” he said.

He mentioned the implications of decoupling strict levies from the VAT system, which has significantly impacted business operations and compliance.