The Ghana National Chamber of Commerce and Industry (GNCCI) has welcomed the government’s overhaul of the Value Added Tax (VAT) system, describing it as a long-awaited relief for the business community.
Chief Executive Officer Mark Badu Aboagye says the reform addresses one of the biggest challenges confronting businesses for nearly four years.
“Largely, this is one of our major concerns for the past three to four years, and in all the budgets, one of our major inputs is for the VAT to be reformed,” he said.
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According to him, the business community was initially encouraged when the government first signalled a possible readjustment of the system last year.
“We were happy when it was announced last year that we’re going to see a reformation and possibly a reduction in the effective VAT rate,” he noted.
However, he said, excitement gradually faded when nothing changed for almost a year. For him, the latest budget finally brings closure and relief.
“Unfortunately, it took almost a year, and then just this budget you’ve seen, that it’s actually been reformed. So we are happy about it. I think one of our major issues, our major problems, has been resolved for us.”
Mr. Badu Aboagye explained that many businesses struggled to comply with the previous VAT structure, which he described as unnecessarily complicated.
“For our members, our complaint largely was that it was so complex. I mean, it’s a VAT where you see the Standard VAT being combined with straight-line levies. The computation itself was a challenge for most of our members.”
He added that businesses were not refusing to pay VAT; rather, calculating it correctly had become a major hurdle.
The GNCCI CEO further explained that key levies, such as the NHIL, GETFund levy, and the COVID-19 levy, had become direct costs to businesses because they could not be claimed as input VAT.
“The straight-line levy was translating into a direct cost to businesses. These are levies that you cannot claim an input VAT on, so they became a direct cost.”
With the government now consolidating the levies under the Standard VAT, businesses can finally claim input VAT on them, significantly reducing their cost burden.
“Now that we have consolidated and it is part of the Standard VAT, it becomes a VAT that a business person can also claim an input VAT, so it doesn’t become a direct cost to businesses again.”
According to him, the new system is clearer, more predictable, and easier for businesses to manage.
“Now it’s simplified. When you pay your 20%, you know how to calculate your output VAT, your input VAT, and how to do your deduction and the ones you have to pay to the government.”
He said discussions on how the reform may affect market prices would come later, but the clarity and simplification were already major improvements.