The Finance Minister, Dr Cassiel Ato Forson has announced a reform of the Value Added Tax (VAT) system implemented by the government.
He said this is to ensure that the revenue mobilisation measure is more efficient.
Dr Forson made the announcement in Parliament on November 13, when he presented the 2026 budegt and economic policy of government.
“Mr. Speaker, in the 2025 Budget and the Mid-Year Fiscal Policy Review, Government made a firm promise, to reform Ghana’s Value Added Tax (VAT) system to make it fairer, simpler and more efficient.
We pledged to remove distortions, address the cascading effects inherent in the current VAT system, strengthen compliance, and create a tax regime that supports both business growth and fiscal stability.
The distortions have negatively impacted overall welfare, increased the deadweight loss in the economy and significantly reduced VAT compliance.
Resetting for Growth, Jobs, and Economic Transformation 2026 Budget,” he said.
He added that, “Today, I am proud to report that we have delivered on that promise. After months of detailed analysis and broad consultations with stakeholders, we have completed the design of a modernized VAT system fit for Ghana’s economic transformation agenda.
Mr. Speaker, Government is, therefore, submitting to this august House, for approval, a bold package of VAT reforms that will make our tax system more equitable, transparent and business-friendly.”
Here are the proposed reforms:
• abolish the COVID-19 Health Recovery Levy;
• abolish the decoupling of the GETFund and NHIL levies from the VAT tax base, allowing both levies to be subject to input tax deductions;
• abolish VAT on reconnaissance and prospecting of minerals;
• reduce the effective VAT rate from 21.9% to 20%;
• raise the VAT registration threshold from GH¢200,000 to GH¢750,000; and
• extend the VAT zero-rating on the supply of locally manufactured textiles to 2028.
Mr. Speaker, these reforms will also reduce the cost of doing business by 5 percent result of subjecting the GETFund and NHIL levies to input-output deductibility.
Mr. Speaker, all together, the VAT reforms is expected to give back GH¢5.7 billion to businesses and households.
Mr. Speaker, the VAT registration threshold has declined in real terms from GH¢200,000 in 2015 to approximately GH¢48,000 in current values. This means that small and micro businesses that were exempt in 2015 from VAT registration are now compelled to register and charge VAT.
This has placed an undue burden on small and micro businesses and also increased the cost of administering VAT. The increase in the VAT threshold is expected to address this problem and make VAT administration simpler and easier to implement.
Mr. Speaker, VAT on mineral exploration and reconnaissance has led to very little investment in minerals exploration over the past two decades. Abolishing VAT on mineral exploration and reconnaissance will revive investor confidence, stimulate greenfield activity, and ensure the long-term sustainability of the country’s mining sector. This measure will promote responsible mining and help to mitigate the haphazard mineral prospecting that degrades our forests and water bodies.
Mr. Speaker, to support the domestic textile industry, Government zero-rated the VAT on supply of locally manufactured textiles which is due to end in December 2025. Government is resolute in supporting the domestic textile industry which has demonstrated the capability to expand when given the appropriate fiscal incentives.
In line with this and the Ghana Textile and Garment policy, Government has decided to extend the zero rating to end of December 2028, protecting over 2,000 direct jobs. These VAT reforms will make Ghana a more business-friendly economy and create the opportunity for business expansion and more jobs.
Mr. Speaker, we are not only seeking to change the policy and legal framework of the VAT regime. We are also deploying electronic and digital solutions to improve VAT administration.
Specifically, the measures proposed include:
• The introduction of digital solutions for tax collection systems, allowing for the monitoring and collection of VAT on cross-border transactions
conducted on digital platforms owned by non-resident taxpayers;
• The introduction and operationalization of Fiscal Electronic Devices (FED) to enhance compliance and facilitate the monitoring of taxable transactions by VAT taxpayers; and
• The introduction of a VAT reward scheme is designed to encourage the public to assist with policing VAT revenue by collecting VAT receipts for
purchases they make. This will allow taxpayers to use their VAT receipts to benefit from a VAT promotion and reward scheme.
Mr. Speaker, these reforms mark a turning point in Ghana’s value added tax administration. They will make compliance easier for businesses, strengthen revenue mobilisation, and enhance the credibility of our fiscal framework for 2026 and the medium term.
The Ghana Revenue Authority will roll out a comprehensive public education and awareness campaign to ensure a smooth and transparent implementation of these reforms.
Mr. Speaker, this is not just a tax reform, it is a step toward a more just, predictable and business-friendly economy. It honours our pledge to lighten the load on honest taxpayers while building a stronger, fairer foundation for national development.
