Tax consultant calls for VAT reforms
Story: Raphael Nii Trebi Hammond
The promise by the Mahama-led administration to eliminate a range of taxes within its first 100 days in office has sparked widespread debate across Ghana.
Among the levies proposed for removal are the E-levy, COVID levy, a 10% levy on betting winnings, emissions levy, and import duties on vehicles and equipment for industrial and agricultural purposes.
These tax cuts are part of the government’s broader agenda to “Reset the Economy and Create Prosperity for All,” aimed at alleviating economic hardships and reducing the high cost of doing business.
While many have welcomed the proposed tax removals, critics have raised concerns about how the government plans to generate sufficient revenue to sustain public services and drive development in the absence of these levies.
The Case for VAT Reform
Tax Consultant and Partner at PricewaterhouseCoopers (PwC), Abeiku Gyan Quansah, has added his voice to the ongoing discourse, calling for reforms to Ghana’s Value Added Tax (VAT) system as a priority over the scrapping of other taxes. Speaking on Business Breakfast on ZED 101.9FM, Quansah highlighted the need to focus on VAT reforms to achieve long-term economic benefits.
According to Quansah, Ghana’s current VAT system is overly complex, creating artificial compliance burdens and imposing unnecessary stress on businesses and households. He argued that reforming the VAT system would simplify tax processes, improve efficiency, and increase compliance, ultimately boosting government revenue more sustainably than removing individual levies.
“VAT reform is one of the government’s excellent proposals,” Quansah stated, adding that the existing structure complicates tax compliance unnecessarily.
Balancing Revenue Generation and Behavioral Impact
Quansah also addressed the broader rationale behind taxation, explaining that taxes serve three key purposes: revenue generation, redistribution, and behavior modification. Using the 10% levy on betting winnings as an example, he noted that while the levy generates revenue, it also aims to discourage excessive gambling. He questioned the government’s plan to remove this levy, asking, “Won’t government be encouraging the behavior by scrapping the levy?”
While Quansah acknowledged the potential benefits of eliminating some taxes to reduce economic burdens, he emphasized that the focus should not be solely on tax removals but also on creating a streamlined and effective tax system.
Navigating Tax Policy Priorities
The government’s proposed tax cuts, part of a 120-day social contract, have been framed as a means to ease economic pressures. However, Quansah cautioned that prioritizing VAT reforms over tax scrapping could yield better long-term outcomes. As discussions around the country’s tax policy continue, experts like Quansah are urging the government to take a balanced and thoughtful approach. Achieving fairness and efficiency in the tax system, they argue, is critical for sustaining public trust, economic growth, and national development.
