The Ghana Union of Traders’ Associations (GUTA) has raised serious concerns over the government’s proposed Value Added Tax (VAT) reforms, warning that the planned increase from a 4% flat rate to 20% for many traders could have devastating consequences for small and medium enterprises (SMEs) across the country.
The Union cautions that the sudden shift in the VAT regime, coupled with the new turnover threshold of GH₵750,000, risks distorting competition and placing undue burdens on Ghanaian traders.
In a statement issued from Accra, GUTA’s First Deputy Secretary General, Richard Amamoo, stressed that while the Union welcomes government efforts to enhance tax compliance and strengthen revenue collection, the reforms in their current form carry significant unintended consequences.
According to Mr. Amamoo, the increase in the flat VAT rate will disproportionately affect traders who were previously operating under the 4% flat rate scheme, forcing them into the standard 20% VAT bracket, even for minor increases in daily or annual turnover.
“The new threshold of GH₵750,000, while seemingly generous, effectively creates a market split that segregates traders,” Mr. Amamoo said.
He explained that two traders selling identical goods within the same market could now be treated differently: one charging 20% VAT because their turnover crosses the threshold, and another charging nothing.
This, he warns, will incentivise consumers to gravitate toward traders who do not charge VAT, placing the other at a significant disadvantage.
Such a split, GUTA argues, will distort fair competition and may even drive some SMEs out of business. Many small traders who previously benefited from the low flat-rate system could now see their operating costs rise dramatically, while struggling to maintain their customer base.
“This is a recipe for higher prices for consumers and loss of business for affected traders,” Mr. Amamoo said.
Another concern highlighted by GUTA relates to the daily turnover exemption of GH₵2,366.
Traders who exceed this figure on any given day will be forced into the standard VAT regime, regardless of whether their annual revenue remains modest.
The Union warns that this may push more SMEs into a cumbersome and expensive compliance framework, encouraging underreporting or avoidance of tax obligations as traders attempt to remain competitive.
The Union is calling on the government to consider a modified tax structure that ensures parity across the sector.
Such a system, GUTA believes, would promote compliance, reduce the risk of non-compliance, and prevent the marginalisation of smaller operators.
By designing a VAT system that considers the operational realities of SMEs, the government could safeguard livelihoods while still improving revenue collection.
Mr. Amamoo also touched on the government’s plans to introduce Artificial Intelligence (AI) systems at the ports to enhance efficiency.
While GUTA supports technology-driven improvements, the Union insists that taxation and port procedures must first be rationalised before AI systems are deployed, warning that failing to do so could amplify the burdens on traders and SMEs who already operate on thin margins.
GUTA’s statement concludes with a firm commitment to dialogue, emphasising that the reforms should not undermine the livelihoods of Ghanaian traders.
The Union calls for immediate consultation with stakeholders to ensure that VAT policy achieves its intended purpose—enhanced compliance and revenue collection—without destabilising markets or jeopardising the survival of small businesses.
Analysts note that while the government’s reform agenda aims to modernise tax administration and broaden the tax base, the pace and scale of the proposed VAT increase could create significant disruption.
For many SMEs, a jump from 4% to 20% is not just a technical adjustment—it represents a fivefold increase in tax liability, with potential knock-on effects for pricing, profitability, and market participation.
The GUTA warning serves as a critical reminder that tax policy reforms, while necessary for revenue mobilisation, must be balanced against the practical realities of small and medium enterprises, which form the backbone of Ghana’s informal and formal trading sectors.
Without careful calibration, the VAT reforms risk creating an environment where compliance becomes prohibitively expensive for SMEs, encouraging market distortions and potentially undermining the very revenue targets the government seeks to achieve.
