The Ghana Revenue Authority (GRA) has rejected claims that the newly introduced Value Added Tax (VAT) regime is responsible for rising prices and market distortions, insisting that the reforms will lower business costs and leave consumer prices unchanged when correctly applied.
In a statement responding to concerns raised by the Abossey Okai Spare Parts Traders Association, the GRA said the claims stem from a “fundamental misunderstanding” of how the new VAT system operates under the Value Added Tax Act, 2025 (Act 1151).
The Authority explained that the transition from the previous 4 percent Flat Rate Scheme to the standard 20 percent VAT regime does not lead to higher prices, contrary to assertions by the traders. According to the GRA, when full input VAT deductibility is properly accounted for, the final price paid by consumers remains the same.
Using an illustration based on a GH¢500 item with a 20 percent profit margin, the GRA showed that under both the old and new VAT systems, the final selling price to the customer is GH¢720. However, under the new regime, the trader operates on a lower cost base because input VAT is fully deductible.
“Under the old system, VAT and levies were embedded in the trader’s cost, creating a tax-on-tax effect,” the statement noted. “The new regime removes this hidden cost escalation by allowing full input VAT recovery.”
The GRA further clarified that price increases currently being observed in some markets are the result of a transitional pricing error, where traders are applying the new 20 percent output VAT on cost structures that still include non-deductible input VAT.
The Authority also dismissed claims that the increase in the VAT registration threshold to GH¢750,000 would distort competition. It described the threshold adjustment as a deliberate relief measure aimed at freeing smaller traders from the administrative burden of VAT registration and filing, noting that the threshold has always been a feature of Ghana’s VAT system.
As part of the reforms, the GRA highlighted several benefits to businesses, including the abolition of the 1 percent COVID-19 Health Recovery Levy, a reduction in the effective VAT rate from 21.9 percent to 20 percent, elimination of cascading taxes, and simplified VAT reporting.
The Authority said it has established a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to support businesses during the transition, offering practical guidance on VAT record-keeping, input tax claims, and correct pricing.
“The GRA reiterates that the new VAT regime, when properly applied, does not increase prices for consumers and does not distort competition in the marketplace,” the statement stressed.
The Authority called on all stakeholders to engage constructively and take full advantage of the benefits of the new VAT system, assuring traders of continued support where assistance is required.
