VAT Reduction Aligns With Campaign Promise; Could Boost Compliance if Leakages are Fixed – EGP Boss Says
Executive Director of the Economic Governance Platform (EGP), AbdulKarim Mohammed, says the government’s decision to reduce the Value Added Tax (VAT) rate reflects its commitment to honouring a major campaign promise and responds to long-standing concerns raised by traders, consumers, and civil society groups.
Speaking during the NorvanReports, Economic Governance Platform (EGP), and Ghana Anti-Corruption Coalition (GACC) X Space discussion themed “Ghana’s Tax Paradox: Can the VAT Reforms Deliver Relief While Expanding Revenue?”, on Sunday, November 16, 2025, Mr Mohammed said the VAT reforms announced in the 2026 Budget mark a significant shift aimed at easing the tax burden on businesses while strengthening compliance.
“The very first impression that I got from the presentation of the budget is that government is trying to fulfil the campaign promise that was made to Ghanaians during the election,” he said. “This has been a major contention for traders and consumers alike for a long time.”
He noted that civil society organisations working on tax and fiscal policy have, for years, raised concerns about Ghana’s high VAT rate and the impact on compliance.
“When tax rates or levels become too punitive, taxpayers begin to find alternatives to either avoid or evade it totally,” he said, adding that high rates do not necessarily translate into higher collections.
Mr Mohammed described the reduction in the VAT rate as “a welcome development,” arguing that it could encourage voluntary compliance if government improves administrative efficiency. He acknowledged concerns about potential revenue shortfalls but believes better enforcement can offset these risks.
“People are raising questions: how is government going to plug the hole this may create? But if we are able to enhance compliance, and the reduction makes it easier for taxpayers, that is a welcome development,” he noted.
He further explained that Ghana’s VAT penetration remains low compared to peer countries, with the country collecting only about 39% of potential VAT revenues in 2025.
“About 60% of the potential remains uncollected due to inefficiencies and issues of compliance,” he said. Despite VAT contributing roughly 30% of total tax revenues, he indicated that growth has stagnated in recent years, improving only after the introduction of e-VAT systems.
Mr Mohammed further argued that, lowering rates while strengthening compliance offers a more sustainable path to increasing VAT revenue than repeatedly raising rates on already-compliant taxpayers.
“If we can reduce the rates and work on enhancing compliance, then we stand a better chance of improving the volumes of revenues collected,” he said.
He also emphasised that broadening the tax base rather than raising rates, must drive the next phase of reforms. According to him, cleaning up tax administration, minimising leakages, and tightening enforcement mechanisms will be critical to achieving government’s GHS 268bn revenue target in the 2026 Budget.
