Chief Revenue Officer at the Domestic Tax Revenue Division Free Zones Unit of the Ghana Revenue Authority (GRA), Dominic Adamnor Nartey, says Ghana’s new standard VAT system allows businesses to deduct input taxes and should not automatically lead to higher prices for consumers.
He explained that under the revised VAT Act 2025 (Act 1151), businesses can recover taxes paid on purchases before selling their goods, a change he says corrects misconceptions that the shift to a 20% VAT rate will increase the cost of goods and services.
Speaking on JoyFM’s Super Morning Show on Thursday, February 19, Mr Nartey broke down how the pricing structure works under the new tax regime, contrasting it with the previous 4% flat rate system.
According to him, under the former flat rate scheme, traders were not allowed to deduct input tax from the VAT paid when purchasing goods, forcing them to treat the tax as part of their production cost.
“If you were a flat rate trader before this amendment, you were not entitled to deduct input taxes,” he said. “When you buy from others, you pay VAT, and that VAT becomes part of your cost before you add your margin and charge the 4%.”
He illustrated the process using a hypothetical example, explaining that a trader who buys an item for GH¢100 and pays GH¢15 VAT would add the GH¢15 to the cost before calculating profit and applying the flat rate tax.
However, he said the new standard VAT system changes this approach by allowing businesses to deduct the input tax, preventing it from increasing the final cost of goods.
“Now that you are a standard rate taxpayer, the law allows you to deduct all inputs that you incur in the form of VAT,” he explained. “You don’t add the input tax to your cost. You add your margin to the original cost and then charge the 20%.”
Mr Nartey further clarified that even after charging the 20% VAT, businesses do not pay the full amount to the tax authority but rather remit the net value after deducting the input tax already paid.
“You are not going to pay the entire 20% to GRA. You deduct the input tax you paid and pay the difference,” he stated.
The explanation comes amid public debate following the passage of the VAT Act 2025, which replaced the 4% flat rate with a 20% standard VAT system. The reform has generated concerns among traders and consumers who fear the new rate could increase prices and affect business operations.
But Mr Nartey maintained that when properly applied, the new system removes tax distortions and improves efficiency in Ghana’s tax framework without necessarily raising prices.
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Source: www.myjoyonline.com