The Ghana Revenue Authority (GRA) has dismissed claims that the newly implemented Value Added Tax (VAT) regime will lead to higher prices for consumers, insisting that the reform will rather reduce costs when properly applied.
GRA’s rebuttal is in response to concerns raised by the Abossey Okai Spare Parts Traders Association, which suggested that the new VAT system under the Value Added Tax Act, 2025 (Act 1151) would increase consumer prices, distort market competition, and impose an unfair burden on traders.
In a statement issued on February 10, 2026, the GRA described the concerns as stemming from a misunderstanding of how the new VAT regime operates.
According to the Authority, the shift from the 4 percent Flat Rate Scheme to the 20 percent standard VAT will not result in price increments because input VAT under the new regime is fully deductible.
Under the previous flat rate system, traders paid 21.9 percent input VAT on purchases, which was not deductible. However, under the new system, traders pay 20 percent input VAT and can claim it back, thereby lowering their actual cost base.
Using an illustration of a GH¢500 base price item with a 20 percent profit margin, the GRA explained that under the old regime, the final price to the customer would be GH¢760.66. Under the new regime, the final price drops to GH¢720, representing a reduction of GH¢40.66.
The Authority stressed that when input VAT deductibility is properly accounted for, customers pay less under the new regime. It noted that any perceived price hikes are likely due to transitional pricing errors, particularly where traders continue to calculate prices using cost structures that include now-deductible input VAT.
On concerns about the increase in the VAT registration threshold to GH¢750,000, the GRA stated that the measure does not create price or market distortions. It explained that non-registered traders still pay VAT on purchases but cannot claim it back, meaning the tax becomes embedded in their costs. Meanwhile, registered traders can recover input VAT and remit only the net difference.
The Authority further outlined several benefits of the new VAT regime, including a reduction in the overall effective tax rate from 21.9 percent to 20 percent, the permanent removal of the 1 percent COVID-19 Health Recovery Levy, full input VAT deductibility including NHIL and GETFund levies, elimination of cascading taxes, and reduced cost of doing business.
It highlighted that the new system introduces a simplified and unified VAT structure, raises the registration threshold to ease administrative burdens on small businesses, and incorporates automatic input VAT recovery through existing filing processes.
The Authority reiterated that the new VAT regime, when correctly implemented, does not increase consumer prices and does not distort competition in the marketplace and urged stakeholders to engage constructively and take full advantage of the benefits offered under the new tax reform.
