AGI Urges Government to Reform VAT, Says VAT System is Crippling Local Businesses
The President of the Association of Ghana Industries (AGI), Dr. Humphrey Ayim-Darke, has strongly criticized the current Value Added Tax (VAT) system, describing it as “the killer in the room” that is crippling local businesses.
Speaking on Joy News’ PM Express on Thursday, February 20, Dr. Ayim-Darke called for an urgent overhaul of the VAT regime, warning that its distortions are stifling the operations of businesses, particularly small and medium-sized enterprises (SMEs).
VAT System Causing Market Distortions
Highlighting the inconsistencies in VAT application, he explained how businesses in the same industry, importing identical raw materials, face different tax treatments due to VAT complexities.
“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,” he stated.
AGI’s Proposal: A Fair VAT System
Dr. Ayim-Darke emphasized that the AGI’s foremost proposal to the Finance Ministry is a rationalization of the VAT structure, urging the government to implement a uniform VAT system rather than embedding levies that increase business 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,” he argued.
Call for Fairness and Compliance
He stressed that VAT reform should not be limited to rate adjustments but should also ensure fairness and compliance.
“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,” he noted.
Government’s Tax Measures Insufficient
While acknowledging the government’s recent tax adjustments, including the removal of some COVID-related and betting taxes, Dr. Ayim-Darke insisted that the primary concern remains the VAT system.
“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,” he cautioned.
Dr. Ayim-Darke concluded with a strong call to action, urging the government to prioritize VAT reforms to support local industries.
“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 stated.
His comments add to growing concerns from the business community about Ghana’s tax regime, as industry players continue to push for pro-business policies that enhance competitiveness and growth.
