Last week, the Minister of Finance, Ken Ofori-Atta, announced during the presentation of the 2023 Budget to parliament, government’s plan to increase Value Added Tax (VAT) by another 2.5percent.
The proposal to increase the rate, forms part of the seven point agenda to revitalize the economy, the Finance Minister told Parliament on Thursday November 24.
“Mr. Speaker, the demand for roads has become the cry of many communities in the country. Unfortunately, with the current economic difficulties and the absence of a dedicated source of funding for road construction, it is difficult to meet these demands. In that regard, we are proposing the implementation of new revenue measures. The major one is an increase in the VAT rate by 2.5 percentage points.”
“This will be complemented by a major compliance programme to ensure that we derive the maximum yields from existing revenue handles,” he added.
Reactions have trailed this announcement by the government. The Ghana National Chamber of Commerce and Industry (GNCCI) has described the government’s decision to increase Value Added Tax (VAT) by 2.5% in the 2023 Budget as insensitive.
“For me, it was insensitive for the VAT to have been increased in these times,” the chief executive of GNCCI, Mark Badu Aboagye, told sit-in host of The Asaase Breakfast Show Benjamin Offei-Addo on Monday (28 November).
“In our submission to the Finance Minister before the 2023 budget was read, we made it clear that an increase in any tax will be suicidal in respect to the current state of affairs,” he added.
In the opinion of this newspaper, contemplating an increase in VAT now is wrong on right timing and inconsistent with current economic reality. Experts have said VAT increase will lead to higher inflation, interest rate hike, more unemployment and generally make people poorer.
If Parliament goes ahead with approve the Budget in its current state, companies, especially those producing items with elastic demand, would experience reduced sales, as they may not be able to easily transfer the 2.5 percent increment to their customers
In our view, which has been shared by many experts over the years, the tax net should be widened to accommodate more taxpayers to avoid asphyxiating the few companies and wage earners whose incomes are known and are easily taxable taxes. Also, most multiple taxes should be eliminated.
