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VAT Reform Must Come First– AGI President Warns Government

February 21, 2025
Stephen M.Cby Stephen M.C
in Vaultz Business
0
VAT Reform Must Come First– AGI President Warns Government

The President of the Association of Ghana Industries (AGI), Dr. Humphrey Ayim-Darke

The President of the Association of Ghana Industries (AGI), Dr. Humphrey Ayim-Darke, has raised concerns over Ghana’s current Value Added Tax (VAT) system, describing it as “the killer in the room” that is crippling local businesses.

He has called on the government to prioritize comprehensive VAT reform before celebrating recent tax cuts, arguing that the existing system distorts market operations and creates unfair competition.

Dr. Ayim-Darke highlighted the negative impact of the VAT regime, particularly on small and medium-sized enterprises (SMEs), which form the backbone of Ghana’s industrial sector. According to him, VAT inconsistencies have led to operational hardships and unfair market conditions. “The major tax issue that we have tabled is the rationalization of the VAT. We believe strongly that it is distorting a lot of operations,” he said.

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He explained that businesses operating under the same conditions are being treated differently under the VAT structure, creating an uneven playing field.

“Imagine two companies operating in the same sector, both importing the same product and paying the same HS code for raw materials. Yet, because of how the VAT is applied, their treatments are completely different. That inconsistency is distorting the market and hurting competitiveness.”

Dr. Humphrey Ayim-Darke

Overhauling the VAT System

The AGI President made it clear that his organization’s foremost proposal to the Finance Ministry is a total overhaul of the VAT regime. He stressed that any new VAT framework must ensure fairness and transparency to prevent businesses from shouldering unnecessary costs.

“If you want to implement a total VAT at 21%, then we say fine, let’s do input-output VAT properly. But don’t embed levies within it that end up distorting our entire operations. When you do that, businesses are left with no choice but to pass the cost onto consumers, which defeats the purpose of fair taxation and stifles economic growth.”

Dr. Humphrey Ayim-Darke

He also emphasized that VAT reform should not just focus on adjusting rates but must address systemic inefficiencies that burden businesses. “Once VAT is rationalized, it becomes the government’s responsibility, through its agencies, to oversee compliance and ensure proper collection. Businesses shouldn’t be burdened with inefficiencies in the system,” Dr. Ayim-Darke stated.

Tax Cuts Are Not Enough Without VAT Reform

While the government has introduced some tax relief measures, including the removal of certain COVID-related and betting taxes, Dr. Ayim-Darke insisted that these steps, though welcome, are insufficient without addressing VAT distortions.

“Yes, we welcome the steps taken on those taxes—it’s a 60% pick of our concerns—but let’s not kid ourselves. The VAT is the biggest hurdle. It’s the elephant in the room—or as I call it, the killer in the room. If we don’t streamline it now, the repercussions for local industries will be dire.”

Dr. Humphrey Ayim-Darke

His comments underscore the broader challenge of creating a fair tax system that supports industrial growth while ensuring government revenue generation. According to him, failing to address VAT distortions could drive more businesses into financial distress, affecting employment and economic stability.

Dr. Ayim-Darke concluded with a strong appeal for immediate action. He called on the government to prioritize VAT reform to create a tax structure that promotes business growth rather than stifling it. “Our message is simple: rationalize the VAT. Remove the distortions, level the playing field, and let’s support local industries to thrive instead of suffocating them under unfair tax structures,” he said.

For Ghanaian industries to remain competitive, he insists that the government must take bold steps to fix the VAT system, ensuring fairness and efficiency across all sectors.

READ ALSO: GSE Composite Index Drops Over 40 Points as Market Nears Week’s End

Tags: Association of Ghana Industries (AGI)Dr. Humphrey Ayim-Darkesmall and medium-sized enterprises (SMEs)VAT Reform
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