Deputy Minister-designate for Finance, Thomas Nyarko Ampem, has proposed innovative strategies to address the persistent Value Added Tax (VAT) revenue gap, highlighting the potential of a VAT lottery as a means to encourage compliance.

During his vetting before Parliament's Appointments Committee today, Ampem emphasized the need to leverage technology and incentivize consumer participation in tax collection.

"I will work with my minister and GRA to use technology to ensure that we rake in more revenue... One suggestion that has come up is a VAT lottery. Today a lot of people go to buy things and they don't insist on VAT receipt because they do not see the need for it. If we can have VAT lottery that will let people know that if I get my VAT receipt and I enter into a draw and I'll possibly win a fridge, an iron... it doesn't matter how small it is. Probably some of these little things will get us there," Ampem stated.

This suggestion comes on the heels of a comprehensive report jointly published by the Ministry of Finance and the Institute for Fiscal Studies (UK), titled A Review of Ghana’s Value-Added Tax (VAT) System. The report delves into the design and administration of Ghana's VAT structure, examining revenue trends and assessing current tax policies through international comparisons and extensive data analysis.

Key findings reveal that Ghana's VAT framework is progressive, with wealthier households contributing a larger share of VAT revenue due to exemptions on essential goods that benefit lower-income households. However, the report notes that, in absolute terms, wealthier households gain more from these exemptions, prompting the government to reconsider their effectiveness under the Medium-Term Revenue Strategy (MTRS).

Additionally, the report highlights compliance challenges, revealing that while many businesses below the VAT registration threshold voluntarily register, numerous businesses that exceed the threshold fail to do so. Even among registered taxpayers, non-compliance remains an issue, with some businesses either not filing returns or submitting returns with zero sales and purchases. The MTRS aims to address these issues through improved voluntary compliance and stricter enforcement.

Another significant reform noted in the report is the 2023 restriction of the VAT Flat Rate Scheme (VFRS) to small taxpayers. This adjustment is believed to have enhanced revenue collection while simplifying compliance for smaller businesses.

The report also points to Ghana’s recent economic growth patterns as a factor in VAT revenue stagnation. Growth driven by investments and exports, rather than consumption, has limited the potential for increased VAT revenue, despite economic expansion and higher tax rates.

These findings have already begun shaping Ghana’s tax policies, with the government exploring additional reforms in line with the MTRS. The proposed VAT lottery, aimed at incentivizing consumers to demand VAT receipts, could become a practical step toward closing the VAT gap and strengthening revenue collection.