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AGI President Warns Government: VAT System Crippling Local Businesses
The President of the Association of Ghana Industries (AGI), Dr. Humphrey Ayim-Darke, has issued a strong warning to the government regarding the country’s Value Added Tax (VAT) system, describing it as “the killer in the room” that is stifling local businesses.
Speaking on Joy News’ PM Express Business Edition on Thursday, February 20, Dr. Ayim-Darke emphasised the urgent need for comprehensive VAT reform to prevent further market distortions and operational challenges, particularly for small and medium-sized enterprises (SMEs).
“The major tax issue that we have tabled is the rationalisation of the VAT. We believe strongly that it is distorting a lot of operations,” he stated.
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Dr. Ayim-Darke illustrated the systemic flaws by highlighting inconsistencies in VAT application: “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.”
As part of AGI’s advocacy, Dr. Ayim-Darke called for a total overhaul of the VAT regime and urged the Finance Ministry to take immediate action.
“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.
Beyond rate adjustments, he stressed the importance of ensuring fairness and compliance within the system.
“Once VAT is rationalised, 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 added.
While acknowledging recent government efforts in removing certain taxes, such as those related to COVID-19 and betting, Dr. Ayim-Darke maintained that VAT remains the most pressing concern.
“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.
He concluded with a strong call to action, urging the government to level the playing field and create a more business-friendly environment.
“Our message is simple: rationalise 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,” Dr. Ayim-Darke stated.
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