Why the new VAT rate could negatively impact the vulnerable – Economist explains

Economist Professor Godfred Bokpin has expressed concern over the implementation of the increment in Value Added Tax (VAT) and its potential impact on the vulnerable in society.

According to him, the revised rate which has been passed by Parliament would negatively impact the price of goods and services which would affect all citizens, particularly the vulnerable.


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He explained that the VAT rate increment from 12.5 to 15 percent will significantly impact the savings of many Ghanaian households which are already grappling with the curent economic challenges.

“VAT rate increases are going to affect consumption. At the end of the day, it is also going to affect the savings mobilisation effort of consumers. When these things happen, they affect the poor,” Prof. Bokpin is quoted by Joy Business.

“If you look at data from Ghana Statistical Service, between 42% and 44% of household expenditure is on food and depending on where you buy your food, there may be VAT”, he added.

Touching on the other aspects of daily life which would impact consumption due to the revised VAT rate, Prof. Bokpin said a critical calculation places the figure above 20 percent, particularly when there is already a GETFund and NHIL taxes imposed on items purchased.

“If you put all of this together, VAT alone at 21% or depending on where you find yourself in certain times of the year. Don’t forget there will be tourism levy, and other taxes”, Prof. Bokpin noted.

Meanwhile, Ghana’s parliament on December 22, 2022, passed the revised rate of VAT from 12.5 to 15 percent.

The passage comes after finance minister Ken Ofori-Atta announced a review of the rate when he delivered the 2023 budget statement before parliament.



MA/FNOQ