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Regressive 2.5% VAT will widen poverty gap — Tax analyst

The Executive Director of Revenue Mobilisation Africa, Geoffrey Ocansey has said the increase in the country's Value Added Tax (VAT) by 2.5 percent announced by Finance Minister Ken Ofori-Atta in the 2023 budget statement and economic policy is "regressive".

Ken Ofori-Atta

He believes the increment in VAT will widen the poverty gap and heap more pressure on Ghanaians who are already overburdened with taxes.

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"It is highly regressive, especially when you take the VAT, the increment of 2.5 percent, you have transferred cost from the sellers to consumers, and you have done it on a mass scale," Ocansey said on Accra-based Citi FM.

He stated that the "less privileged who are receiving stagnant salaries, those who have lost their jobs, pensioners, they are all on that scale, and they are going to be buying and competing with those who earn taking high salaries. It is so regressive that they are going to widen the poverty gap."

The proposal to increase VAT forms part of the government's seven-point agenda to revitalize the economy, Ofori-Atta said when he presented the 2023 budget in Parliament on Thursday, November 24, 2022.

The standard VAT rate is 12.5%, except for supplies of a wholesaler or retailer of goods, which are taxed at a total flat rate of 3%.

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