COVID-19 levy to be ‘abolished’ under new VAT amendment bill – MoF

Minister of Finance, Dr Cassiel Ato Forson, says plans are underway for the central government to abolish the coronavirus  COVID-19 Health Recovery Levy in fulfillment of a promise made by the National Democratic Congress (NDC).

Presenting the Mid-Year Review Budget in Parliament on Thursday, July 24, the Finance Minister said the levy, introduced during the pandemic to support healthcare spending, is set to be abolished under a new Value Added Tax (VAT) amendment bill.

“COVID levy will be abolished,” Dr Forson stated clearly. “The effective VAT rate will be reduced,” the Minister in Charge of Finance told Parliament, adding, signalling a wider review of Ghana’s current VAT system.

Dr Cassiel Ato Forson explained that the central government is committed to simplifying and restructuring Value Added Tax (VAT) to make it fairer and more efficient.

“These reforms are aimed at addressing the distortions and cascading effect inherent in the current VAT structure,” the Minister for Finance stated while delivering the much-awaited 2025 Mid-Year Review Budget in Parliament.

The Minister of Finance hinted that the punitive cascading effect of the GETFund and National Health Insurance Scheme (NHIS) levies will be removed, VAT rates will be removed, and a unified VAT rate will be implemented.

The Minister also said the VAT rate registration threshold will be increased to exempt small and micro businesses, saying compliance will be improved through public education, awareness creation, and the introduction of physical electronic devices.

In a related development, the International Monetary Fund (IMF), following an engagement with some government officials, has endorsed the decision by the government to remove the COVID-19 levy from the country’s tax laws

Speaking to Joy Business, Commissioner of Domestic Tax Revenue Division at the Ghana Revenue Authority, Edward Apenteng Gyamera, disclosed that stakeholders agreed on the removal of the COVID-19 levy as well as other tax handles hampering business growth.

“I think from the engagements with stakeholders and the IMF, issues that the Minister even indicated in the budget, for instance, the removal of the COVID levy, are something that has been agreed. I think so far, with our interaction with the stakeholders, everybody is of the view that this levy should be taken off when the reform is completed

Then the removal of the cascading effect of the levies, treating the levies as part of the VAT mechanism where businesses can claim input and deductions, has been generally accepted by all”, the Tax Commissioner stated.

The controversial COVID-19 levy was introduced by the erstwhile Nana Akufo-Addo government to raise funds to support operations of some COVID-19-related activities as the government continues to revive the economy.

The levy was passed under the COVID-19 Health Recovery Levy Act, 2021, and assented to by then President, Nana Addo Dankwa Akufo-Addo, to impose a special levy to be known as COVID-19 Health Recovery Levy on the supply of goods and services and imports to raise revenue to support COVID-19 expenditures and provide for related matters.