The finance minister of Ghana introduced a revision to the country’s sales tax regime during the mid-year budget review on  Thursday, July 19, 2018. Below are his words taken from the budget statement [pdf].

Mr. Speaker, Government is therefore consolidating contributions to the Health
Insurance Fund Levy and the GETFund portion of the VAT into a separate Health
and Education Levy. This will enable Government isolate and increase the budget
for health and education. Both the Health Insurance Fund and the GETFund levies
will continue to be 2.5 percent each, while the applicable VAT rate is 12.5 percent.

Now as I explained in an earlier post, the VAT rate of 17.5% is not paid outright to GRA. Rather, a VAT registered entity pays the difference between the VAT they are charged on purchases (input VAT) and the VAT they charge on sales (output VAT). As many businesses sometimes pay more in VAT than they collect, they usually have a VAT credit at the end of the month and do not pay money to GRA. However, those paying the 3% flat rate do not do any input/output computations. They just pay 3% on all VAT applicable sales to GRA.

With the new system, the VAT rate of 12.5% will still undergo the input/output treatment, however, the payment of 2.5% NHIL and 2.5% GETFund levies will be paid direct to GRA. This means that every month, GRA will receive money from every VAT registered entity because the entity would not be able to offset the 2.5% NHIL and 2.5% GETFund levy against any VAT applicable purchase they make.

This policy means that the total of 5% NHIL and GETFund levies becomes a direct charge on purchases made by businesses, thus increasing their business expenses. Businesses could pass these charges unto their customers. The policy also means increased inflows to GRA every month with respect to sales tax.