Dr. Cassiel Ato Forson, Ghana’s Finance Minister, has declared a major change in policy: the COVID-19 levy would be eliminated by October 2025.
This measure is part of a broader overhaul of the Value Added Tax (VAT) that intends to ease the financial burden on individuals and encourage economic revival.
Key Elements of the VAT Reforms
The COVID-19 Health Recovery Levy will be repealed entirely to reduce the tax burden on citizens and support economic recovery.
*Decrease in Effective VAT Rate*: The effective VAT rate will be lowered to lessen the financial burden on both people and businesses. Elimination of Cascading Effect of GETFund and NHIS Levies*: The cascading effect of these levies will be eliminated in order to boost productivity and avoid unfair price inflation.
Removal of VAT Flat Rates*: In order to streamline the tax system and lessen compliance challenges, VAT flat rates will be eliminated.
*Unified VAT Rate*: To simplify the system and eliminate price distortions, a single, unified VAT rate will be used.
*Increased VAT Registration Threshold*: To encourage the expansion of the unorganized sector, the VAT registration threshold will be raised to exempt small and micro firms.
*Improved Compliance*: To improve tax compliance, lower tax evasion, and boost revenue, electronic fiscal devices and public education will be implemented.
Justification for the VAT Reforms
The VAT reforms are designed to ¹ ²:
– Ease the financial burden on citizens and businesses
– Foster economic recovery and growth
– Simplify the tax structure and reduce compliance difficulties
– Promote fairness and equity in taxation
– Enhance tax compliance and revenue generation
Implementation Timeline
The Ministry of Finance is preparing a new VAT bill, which is expected to be ready by October 2025. The bill will be submitted to Parliament as part of the 2026 Budget Statement. Consultations on the reforms have already begun, with the Ghana Revenue Authority and the Ministry of Finance engaging stakeholders across the country.³
Impact on the Economy
The abolition of the COVID-19 levy and the VAT reforms are expected to have a positive impact on the economy. By reducing the tax burden on citizens and businesses, the government aims to stimulate economic growth, improve tax compliance, and enhance revenue generation.
The reforms are also expected to promote fairness and equity in taxation, which will contribute to a more stable and prosperous economy.⁴
Conclusion
The abolition of the COVID-19 levy and the VAT reforms are significant steps towards creating a more favorable business environment and promoting economic growth in Ghana. By simplifying the tax structure, reducing the tax burden, and improving compliance, the government aims to stimulate economic recovery and improve the lives of Ghanaians.
With the new VAT bill expected to be ready by October 2025, it’s clear that the government is committed to implementing these reforms and creating a more equitable and efficient tax system.
