PwC Tax Partner gighlights impact of new VAT Reforms on business

By Maame Efua Kwaduah

A Tax Partner at PwC Ghana, Abeiku Gyan-Quansah, has outlined the major changes in the government’s Value Added Tax (VAT) system and how these adjustments will affect businesses across the country. He said the new measures are meant to ease the burden on smaller businesses while improving compliance among larger ones.

“Previously, a business with annual sales exceeding GH¢200,000 was not required to register for VAT. Spread over a 50-week year, that GH¢200,000 works out to about GH¢800 a day. So, if a business doesn’t sell more than GH¢800 daily on average, it wouldn’t need to register for VAT.

The Government of Ghana is now proposing to raise the threshold to GH¢750,000. Using the same 50-week, five-day working year calculation, that comes to about GH¢3,000 a day so if you go and buy waakye and the woman that dishes out the waakye has a huge pile there with some under the table and you buy your waakye and think that what she is selling is exceeding GH¢3,000 cedis then she should probably be giving you a VAT invoice maybe so we see whether that happens,” he noted.

He stressed that this adjustment will reduce pressure on micro-businesses, but it also raises questions about how government will ensure that businesses above the threshold comply. He revealed that in the past, VAT rules were separated for goods and services, which created confusion among taxpayers. He said returning to that system would complicate tax administration and create unnecessary disputes.

According to him, the business community is also waiting for clarity on the future of the VAT Flat Rate Scheme. He said government had earlier signalled a plan to remove the scheme, but later statements have been silent on the matter. He noted that traders in various markets are already worried that they may be required to charge the full standard rate of about 20% which they fear could drive customers away.

He stressed that government should consider allowing businesses with annual sales between GH¢750,000 and GH¢1 million to operate under a flat VAT rate of around 5 percent. According to him, this will encourage more traders to comply rather than resist the system. He warned that if traders strongly push back, government may be forced to reverse its position, which could disrupt current reforms.

He also explained the long history behind the current VAT rate structure. According to him, VAT started at 10 percent in 1998, and over the years education and health levies were added. He said these additions have pushed the effective VAT rate to about 21.9 percent. He stressed that many Ghanaians already see VAT as being above 20% so government should make the system clearer by adopting a straightforward standard rate of 20%.

He revealed that another challenge is how VAT refunds are treated during audits. According to him, some legitimate refunds are rejected by officers of the Ghana Revenue Authority, creating frustration for businesses. He stressed that government must ensure fair application of the law and allow eligible businesses to receive their refunds without unnecessary delays. This, he said, will build trust and encourage voluntary compliance.

He also pointed to problems with Import Declaration Forms. He said some banks wrongly ask taxpayers to fill out import forms even for services, which do not pass through the ports. According to him, this results in wrong classifications and confusion during assessments. He stressed the need for clearer guidance so that taxpayers do not complete forms that do not apply to their transactions.

On digital tax systems, he said government plans to fully roll out its electronic invoicing platform in 2026. He explained that this move is expected to enhance monitoring and reduce leakages in tax collection.

Overall, he stressed that while the new VAT threshold brings relief to small businesses, government must continue engaging traders, simplify the system, and implement the reforms carefully. According to him, if the changes are managed well, they will increase compliance, widen the tax net, and support national revenue efforts.