Finance Minister Cassiel Ato Forson announced on Thursday that the John Mahama administration plans to inject GHC5.7 billion into Ghana’s economy in 2026 through a comprehensive reform of the Value Added Tax (VAT) system. A key component of this initiative is the removal of the COVID-19 Health Recovery Levy, introduced during the pandemic.
Forson stated that scrapping the levy alone will return approximately GHC3.7 billion to households and businesses, offering an immediate boost to consumer spending and commercial activity. “This initiative is intended to enhance disposable income and lower operational expenses, thereby promoting job preservation and improving market liquidity,” Forson told Parliament.
The broader VAT reform package is designed to streamline the tax structure and alleviate financial pressures on both businesses and consumers. Additional measures include:
- Input Tax Deductions on Levies: Businesses can now claim deductions on GETFund and NHIL levies, reducing operating costs by an estimated 5%.
- Reduced Effective VAT Rate: The overall VAT rate drops from 21.9% to 20%, marginally lowering the cost of goods and services.
- Raised Registration Threshold: VAT registration for small and medium-sized enterprises (SMEs) will now apply only to businesses with turnover above GH₵750,000, up from GH₵200,000.
- Targeted Industry Relief: VAT on mineral prospecting will be abolished to encourage upstream investment, while VAT zero-rating on locally manufactured textiles is extended to 2028.
The comprehensive reforms are seen as part of the Mahama administration’s broader push to stimulate growth after years of fiscal consolidation, signaling a shift from economic recovery to transformation.
Source: Jonathan Ofori
