AGI President Urges Government to Address VAT Issues Before Celebrating Tax Cuts

The President of the Association of Ghana Industries (AGI), Dr. Humphrey Ayim-Darke, has raised serious concerns about the current Value Added Tax (VAT) system in the country, which he believes is severely hurting local businesses. Referring to the VAT system as “the killer in the room,” Dr. Ayim-Darke called for immediate reform to prevent further damage to business operations, particularly for small and medium-sized enterprises (SMEs), who are bearing the brunt of the system’s flaws.

In a recent appearance on Joy News’ PM Express Business Edition on Thursday, February 20, Dr. Ayim-Darke spoke in detail about the detrimental effects of the existing VAT structure on local businesses. According to him, the current system is creating severe distortions within the marketplace and hindering business growth. He used an example to illustrate the problem, highlighting how two companies within the same industry, importing identical products and paying the same tariff for raw materials, are treated differently under the VAT system. This discrepancy, he noted, leads to market distortions that unfairly disadvantage some businesses while others benefit from the system’s inconsistencies.

“The key issue we have put forward is the rationalization of VAT,” Dr. Ayim-Darke explained. “We believe that the current system is distorting many operations and creating unequal competition within industries.” He added that the AGI’s main proposal to the Ministry of Finance is to overhaul the VAT system entirely. If the government is set on implementing a VAT rate of 21%, he suggested that it should be done in a way that ensures the proper application of the input-output VAT model.

However, Dr. Ayim-Darke strongly cautioned against embedding additional levies within the VAT system, which he believes would only lead to further complications. “When such levies are embedded in the VAT system, it distorts our operations,” he said. “It forces businesses to pass the additional cost on to consumers, which defeats the purpose of fair taxation and stifles economic growth.” This added financial burden on businesses, he argued, could have a long-lasting negative effect on the country’s economic development.

In addition to calling for VAT reform, Dr. Ayim-Darke emphasized that the government’s role in ensuring fairness and proper enforcement of the VAT system is critical. “Once the VAT is rationalized, it becomes the responsibility of government agencies to guarantee proper compliance and collection. Businesses should not be the ones bearing the burden of inefficiencies in the system,” he said. He argued that these inefficiencies not only hurt business owners but also make it more difficult for companies to compete fairly in the marketplace.

While acknowledging the government’s recent efforts to address certain taxes—such as the removal of COVID-related levies and taxes on betting—Dr. Ayim-Darke made it clear that VAT remains the central issue for the AGI and its members. “Yes, we welcome the steps taken on those taxes—it’s about 60% of our concerns. But we should not kid ourselves. The VAT is the biggest challenge,” he said. “It is the elephant in the room—or as I call it, the killer in the room. If we don’t address it now, local industries will continue to suffer, and the consequences will be severe.”

Dr. Ayim-Darke concluded his remarks by urging the government to take decisive action on VAT reform. “Our message is simple: we need to rationalize VAT,” he said. “We need to remove the distortions, level the playing field, and allow local industries to thrive. Without these changes, businesses will continue to struggle, and our economy will not be able to reach its full potential.”

The AGI President’s message underscores the urgency of addressing VAT reform as a means to support local industries and create a more favorable business environment in Ghana. He called on the government to prioritize these changes to prevent further damage to the country’s business landscape.