Tax expert describes VAT as retrogressive

Tax expert and lecturer at the University of Professional Studies Accra (UPSA), John Amoh, has described as retrogressive, the Value Added Tax (VAT).

According to the tax expert, VAT is retrogressive in the sense that it impacts low-income earners and the poor the most, due to the fact low-income earners and the poor spend a larger portion of their income on goods and services which are VAT charged.

“VAT hits the poor harder, it impacts them the most because they spend a higher percentage of their income on buying goods and services,” he stated.

Adding VAT will continue to be retrogressive for low-income earners if not properly adjusted to be less burdensome on low-income and poor consumers.

In making VAT less retrogressive for taxpayers, particularly poor taxpayers, Mr Amoh suggested the provision of subsidies for low-income earners and the poor in the payment of VAT.

Speaking at the second edition of the PFM Tax Africa Network Dialogue Series held on Wednesday, June 16, 2021, Mr Amoh noted the VAT implemented in over 160 countries around the world including Ghana, has become the most important instrument of domestic revenue mobilization.

According to him, VAT contributes to 25 percent of all tax revenues mobilised in Sub-Saharan Africa (SSA).

Giving a brief background to the introduction of VAT in Ghana, Mr Amoh averred the tax handle was introduced to replace and consolidate 5 different existing independent taxes namely; entertainment tax, betting tax, hotels and restaurants tax, beer tax and sales tax.   

It was also to widen the country’s tax base, fairly spreading the burden of taxation and thereby increasing tax revenues as well as simplifying tax administration and enhancing tax compliance.   

On the merits of the introduction of the VAT, Mr Amoh stated that the tax handle has resulted in an appreciable level of increment in tax revenues, successfully pivoted the introduction of the NHIL and GETFund and eliminated multiple indirect taxes.