Ghana’s trading community is sounding the alarm as the government’s new Value Added Tax (VAT) structure triggers widespread fear and uncertainty across markets.
The Ghana Union of Traders’ Associations (GUTA) has issued a strong caution that the sudden shift from a 4 percent flat rate to a 20 percent standard VAT for many traders is set to unleash market chaos, destabilise businesses, and distort competition nationwide. The Union believes the new tax regime, if not urgently reviewed, risks pushing thousands of small and medium enterprises (SMEs) to the brink of collapse.
At the heart of GUTA’s concern is the abrupt and steep jump in VAT obligations. For years, many SMEs operated under the relatively manageable 4 percent flat rate scheme. Under the new reforms, however, any trader whose turnover crosses the GH¢750,000 threshold will be automatically pushed into the standard 20 percent VAT bracket. According to GUTA, this represents not just a tax adjustment but a seismic shift with far-reaching implications.
Richard Amamoo, GUTA’s First Deputy Secretary General, said the Union is observing the situation “with grave concern”, noting that such a drastic leap in tax requirements creates unbearable pressure for traders. Though GUTA acknowledges the importance of boosting tax compliance and government revenue, the Union stresses that the new structure comes with severe unintended consequences.
Unfair Market Segregation and Distorted Competition
One of the most alarming concerns for GUTA is the creation of what it describes as a “segregated market”. Under the new arrangement, two traders selling the same products in the same market may now face completely different tax obligations. A trader whose turnover exceeds GH¢750,000 will be required to apply a 20 percent VAT, while another trader with a slightly lower turnover will charge no VAT at all.
This disparity, GUTA argues, places the higher-turnover trader at an automatic disadvantage. Customers naturally seek lower prices, and the VAT-exempt trader will easily become the preferred option. GUTA fears that this uneven playing field will steer customers away from compliant VAT-charging businesses, ultimately causing severe revenue losses and business closures.
The Union also warns that traders who previously fell under the flat rate scheme will now be thrown into the much larger and more complex VAT bracket, amplifying administrative burdens and compliance costs.
Daily Turnover Exemption Deepens Trader Anxiety
Beyond the annual threshold, GUTA has also raised red flags about the daily turnover exemption of GH¢2,366. Any trader whose daily sales exceed this amount will be automatically pushed into the standard VAT regime. For busy market centres and major trading hubs, crossing this daily threshold is common, meaning many traders could unexpectedly find themselves subjected to the 20 percent VAT.
GUTA warns that this will force traders to increase their prices to accommodate the new tax obligations, inevitably passing the burden on to consumers. Higher prices, in turn, may drive customers away, creating a negative cycle of reduced sales, lower profitability, and eventual business decline.
Mr Amamoo notes that this could trigger a wave of unintended outcomes, including mass non-compliance as traders attempt to stay afloat amid rising pressures.
In light of these challenges, GUTA is urging government to consider implementing a modified tax system that gives traders the option to choose a fairer and more manageable structure. The Union argues that offering alternatives would not only promote compliance but also prevent unnecessary distortions in the market.
GUTA emphasises that taxation should support the growth of SMEs rather than undermine their ability to operate. With many traders still recovering from inflationary pressures, high import costs, and supply chain disruptions, the Union believes that the government must take a more measured and supportive approach to tax reform.
Concerns Over AI Deployment at the Ports
The government’s plan to introduce Artificial Intelligence (AI) systems at the ports has also drawn commentary from GUTA. While the Union welcomes technology that enhances efficiency, it insists that long-standing concerns about high taxes and charges at the port must first be resolved “as promised”.
According to GUTA, deploying advanced technology without first rationalising port taxes could worsen the situation for importers, who already face high costs. For the Union, efficiency must go hand in hand with fair taxation.
As the debate over the new VAT regime intensifies, GUTA remains firm in its stance that the reforms must not “harm the livelihood of Ghanaian traders”. The Union says it is committed to dialogue but insists that the government must recognise the looming chaos the policy could unleash if left unchanged.
With SMEs serving as the backbone of Ghana’s retail economy, the stakes are high. The coming weeks will determine whether the government moves toward a more balanced and inclusive tax framework or whether the fears of traders materialise into widespread market disruption.
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