While recognizing the government's overhaul of the existing VAT system as a wise approach and a positive reaction to issues highlighted ...
While recognizing the government's overhaul of the existing VAT system as a wise approach and a positive reaction to issues highlighted by private sector companies, professional services firm Deloitte feels its effectiveness will rely on expanding the tax base, enhancing administration and simplifying compliance, as well as ensuring robust enforcement.
Deloitte further states that these measures will help protect income, ensure equity, and aid Ghana's economic development plan.
As a result, Deloitte suggests that the GRA should enhance taxpayer awareness, simplify digital tax systems, and continue frequent discussions with small and medium enterprise representatives to ensure the policy is effective and broadly implemented.
The government's underperformance in revenue collection for 2025 across PAYE, corporate income tax, VAT, excise duties, growth and sustainability levy, and import duties necessitates deeper analysis to identify underlying reasons and suggest actions to reverse this decline.
At the recent annual Deloitte Economic Dialogue discussing the 2026 Budget, President of the Ghana Hotels Association (GHA), Dr. Edward Ackah-Nyamike, shared the association's "uncomfortable" views on the 20 percent rate, stating that GHA had anticipated a much greater decrease—specifically, 10 percent.
However, the Coordinating Director (Technical) and Director overseeing the Real Sector Division at the Ministry of Finance (MoF), Mr. Samuel Arkhurst, supported the government's choice to establish the effective value added tax (VAT) rate at 20 percent – stating that this amount reflects a crucial compromise between offering substantial financial relief to the private sector and achieving the government's ambitious revenue generation goals.
Although Mr. Arkhurst recognized the legitimacy of GHA's goals for more significant reductions, he emphasized that the government's directive demands a prudent method of generating income.
"The cut is a courageous move. We have essentially eliminated six percentage points of indirect tax from the system, leading to a decrease from the earlier projected 21.9 percent effective rate to 20 percent," Mr. Arkhurst stated.
The 20 percent rate was selected to avoid weakening the domestic revenue foundation, which is still crucial for funding public services and development initiatives, he mentioned.
The budget's current forecasts project an increase in the ratio from 16 percent of Gross Domestic Product (GDP) in 2025 to 16.8 percent in 2026, with a long-term objective of attaining 18 to 20 percent by 2027. Meeting these goals necessitates a careful strategy for tax reform.
Adding context to the conversation, Daniel Owusu, Managing Partner at Deloitte Ghana, emphasized the importance of these gatherings in closing the gap between policy creation and private sector execution.
During a separate post-budget conference hosted by KPMG and UNDP in Accra, Anthony Sarpong, the Commissioner-General of the Ghana Revenue Authority, highlighted the government's focus on VAT as the key component of the country's domestic revenue strategy for the upcoming year.
The rise in the threshold will enable smaller companies to remain outside the VAT system until they grow, thereby lowering their administrative workload. The adjustment, he mentioned, provides small businesses with the opportunity to "concentrate on their operations" before facing full VAT responsibilities.
The government is updating the VAT system to lower compliance expenses, enhance equity, and assist businesses.
Key changes involve eliminating the COVID-19 Health Recovery Levy, lowering the actual VAT rate from 21.9 percent to 20 percent, and increasing the VAT registration threshold for goods from GH¢200,000 to GH¢750,000.
The initiatives are anticipated to release approximately GH¢5.7billion for companies and families in 2026, with GH¢3.7billion linked to the elimination of the COVID-19 tax.
Companies will also experience the removal of cumulative impacts caused by charges like the NHIL and GETFund portions, which previously contributed approximately 6% in non-deductible expenses.
Mr. Sarpong mentioned that the reforms are a key element of a broader plan to enhance tax adherence using automated solutions. The GRA intends to implement an AI system that assists with Customs valuation and categorization, substituting manual procedures that typically require up to an hour per shipment.
The authorities are also developing blockchain-based cargo information systems to prevent leaks in import declarations and international transfers. A five-year GRA review revealed that over US$45 billion transferred through import declarations led to less than US$7 billion worth of goods actually entering the country.
The updated system will enable GRA and banks to independently confirm if goods associated with international transfers have been dispatched. Additional enforcement actions involve more rigorous regulations regarding cash transactions at airports. Travelers carrying over US$10,000 are required to declare it, while those moving sums exceeding US$50,000 must supply information about the origin and intent of these funds.
Scanners are set to be deployed for identifying unreported currency, and GRA will also implement delayed fiscalisation regulations in 2026. Merchants will need to employ electronic systems that send VAT information instantly to the relevant authority.
Provided by SyndiGate Media Inc.Syndigate.info).
