“The idea is that once the pressure on businesses reduces, they will be able to expand. In the medium to long term, the government will earn more revenue as these businesses grow,” he told the Graphic Business in an interview

Despite describing the reform as commendable, Prof. Bokpin said Ghana’s 20 per cent standard VAT rate was too high, noting that 18 per cent was considered Ghana’s optimal VAT rate based on existing studies.

“If the rate is 18 per cent and you push it up by even one percentage point, it becomes counterproductive,” he stated.

He, therefore, urged the Finance Minister to consider reducing the VAT rate from 20 per cent to 18 per cent in the 2027 Budget, to align Ghana more closely with regional and structural peers.

He mentioned that Nigeria’s standard VAT rate stood at 7.5 per cent, while many other African countries operated around 18 per cent.

With Ghana participating fully in the African Continental Free Trade Area (AfCFTA), he advised that maintaining a relatively high VAT rate could encourage smuggling, especially from countries with lower tax rates.

“A strengthening cedi combined with a high VAT rate increases the incentive for smuggling from places such as Nigeria, where the rate is significantly lower,” he noted.

He further explained that the government’s goal of improving productive capacity and export performance would be undermined by a VAT rate that increased domestic production costs, adding that “a higher VAT rate does not support the economic philosophy of building export competitiveness.”

VAT reforms

Presenting the 2026 Budget Statement and Economic Policy to Parliament on Thursday, the Minister of Finance, Dr Cassiel Ato Forson, announced the scrapping of the COVID-19 Health Recovery Levy and sweeping reforms to the Value Added Tax (VAT) system to inject GH¢3.7 billion into the economy and return nearly GH¢6 billion to businesses and households in 2026. 

The measures, he said formed part of government’s broader fiscal and economic reform agenda aimed at stimulating growth, promoting fairness, and easing the cost of doing business.

“For emphasis, we promised to abolish the COVID-19 Levy. With the support of this House, I am happy to announce today that it is abolished,” Dr Forson said, explaining that by removing the levy, government was “putting GH¢3.7 billion back into the pockets of individuals and businesses in 2026 alone.

The decision, he said reflected the administration’s commitment to responsible but compassionate economic management.

The Finance Minister further unveiled a comprehensive package of VAT reforms designed to simplify the tax system, eliminate distortions and strengthen compliance.

Key among them were the reduction of the effective VAT rate from 21.9 per cent to 20 per cent, the raising of the VAT registration threshold from GH¢200,000 to GH¢750,000, and the restoration of input tax deductibility for the Ghana Education Trust Fund (GETFund) and the National Health Insurance Levy.

The Minister said these reforms would make the tax system more equitable, transparent and business-friendly, and reduce the cost of doing business by five per cent as well as ensure that small and micro enterprises (SMEs) were no longer overburdened by unnecessary compliance requirements.

"These reforms will also reduce the cost of doing business by five per cent as result of subjecting the GETFund and NHIL levies to input-output deductibility. All together, the VAT reforms is expected to give back nearly GH¢6 billion to businesses and households, Dr Forson stated. 

Revenue leakages at ports

Dr Forson stressed that significant leakages at the ports continue to undermine revenue mobilisation. 

He said a recent audit revealed systemic weaknesses in classification, valuation, and cargo inspection, stating that in 2024 alone, Ghana recorded imports valued at GH¢204 billion (CIF), yet only GH¢85 billion was taxable, pointing to misclassification and under-invoicing.

To tackle this, Mr Forson said the government would deploy Artificial Intelligence (AI)-driven pre-arrival inspections for all cross-border shipments, a technology that would detect under-valuation, flag high-risk goods, and strengthen Customs’ capacity to combat smuggling, improve safety and protect national security.

“By integrating automation into port operations, we expect to significantly boost customs revenue, enhance trade efficiency and close long-standing revenue gaps,” he stated.