The development of Ghana’s capital markets has been a long process, shaped by economic reforms, regulatory changes, and efforts by governments to broaden investment opportunities for individuals and institutions.

A capital market is where long-term

financial instruments like equity (shares), debt (bonds), treasury bills, and mutual funds are traded. These markets are vital for
mobilizing savings into productive investments, supporting business growth, and fostering economic development.

In Ghana, the capital market has expanded from a narrow base in the early 1990s to a more diversified ecosystem that includes a stock exchange, bond markets, alternative markets for smaller firms, and emerging collective investment schemes such as mutual funds.

This evolution reflects broader liberalization and financial sector reforms over the past four decades.

Even though there have been several gains in this sector of the financial ecosystem, recent events like the Domestic Debt Exchange Programme (DDEP) delt a hefty blow to the sector affecting investors’ trust and confidence.

What is expected from policy makers will be actions to incentivise investors into the sector to restore the lost trust and confidence and not to introduce taxes on the cost of operations of investors through the newly promulgated Value Added Tax Act, 2025 (Act 1151).

This article seeks to examine the effect of Act 1151 on the operations of players in the sector and how it will impact the capital market
performance with recommendations on the way forward for consideration by regulators, government, and players in the sector.

1. Early financial reforms and the birth of the capital market

The roots of Ghana’s modern capital markets can be traced back to structural reforms in the 1980s.

The government introduced the Financial Sector Adjustment Programmes (FINSAP) to liberalize Interest Rates, improve Monetary Policy,
and Develop Money and Capital Markets.

As part of these changes, treasury bills were introduced in 1986 as a market-based instrument to manage liquidity and offer short-term investment options.

These early reforms laid the foundation for a market-based financial system and created the conditions necessary for broader capital market development.

a. Establishment of the Ghana Stock Exchange

A key milestone occurred in 1990 with the establishment of the Ghana Stock Exchange (GSE). The exchange was created to provide a formal platform for trading securities such as shares (equity) and bonds.

Its objective was to mobilize capital from investors and match it with corporations and government agencies seeking long-term financing for growth. Trading commenced in November 1990, marking the beginning of organized equity trading in Ghana. Over the years, the GSE has
expanded its product offerings and investor base.

b. Development of the debt markets

In addition to equity, Ghana’s capital market has seen significant growth in debt instruments. Government securities such as treasury bills, notes, and bonds have become important parts of the market.

The Ghana Fixed Income Market (GFIM), launched in September 2015, brought electronic trading to fixed income instruments, making it easier for investors to buy and sell government and corporate bonds.

Treasury bills represent short-term debt (usually under a year), while bonds are medium and long-term instruments. The government issues these instruments to finance budget deficits and investment in infrastructure. Over time, the volume of government debt traded has grown, making it a cornerstone of the capital market.

c. Alternative markets and product diversification

To deepen market participation and broaden investment options, the Exchange introduced the Ghana Alternative Market (GAX). This parallel market is designed to help small and medium enterprises (SMEs) access capital by offering a less stringent listing process compared with the Main Market.

Apart from traditional stocks and bonds, new exchange-traded products have appeared. For example, the Absa NewGold ETF (an exchange-traded fund tracking gold prices) was listed in 2012, making Ghana part of a regional trend toward diversified investment products.

d. Mutual funds and collective investment schemes

Alongside equity and debt markets, mutual funds and unit trusts have gained ground in Ghana as collective investment vehicles.

These funds pool savings from multiple investors and invest in diversified portfolios of securities, including stocks and bonds. They provide a way for less sophisticated or smaller investors to participate in capital markets without having to pick individual securities.

Regulatory oversight for mutual funds and related products falls under the Securities and Exchange Commission (SEC).

The SEC sets rules for the registration and operation of Broker Dealer, Crowdfunding Intermediary, Crowdfunding Platform, Custodians, Depositories, Exchange Traded Funds, Fund Manager, Investment Advisory, Issuing House, Mutual Funds, Primary Dealers, Private Funds, Real Estate Investment Trust Funds, Registrars, Securities Exchanges, Trustees, Unit Trust, and other intermediaries to protect investors and ensure market integrity.

e. Government interventions to promote capital market participation

Over time, successive governments in Ghana have taken steps to encourage broader participation in capital markets.

In the early 2000s and into the 2010s, the government used tax incentives to stimulate market participation. For example, capital gains tax exemptions were extended for investors on the stock exchange to reduce the tax burden on returns from investments.

There were also tax holidays for listed companies to encourage more listings.

To deepen activity on the stock market, the government extended incentives including VAT exemptions on financial services for mutual funds and unit trusts that invest in equities. This was intended to make investment products more attractive and cheaper for Ghanaian investors.

(a) Regulatory reforms and financial infrastructure development

Lawmakers and regulators have periodically updated the legal and supervisory framework. In the past decade, revisions to the
Securities Industry Act and new guidelines for note trustees, OTC markets, and issuing houses have aimed to improve transparency, governance, and investor protection.

The SEC’s Capital Market Master Plan (2020–2029) is a strategic long-term blueprint to improve market diversity, widen the investor base, strengthen infrastructure, and boost confidence in the capital markets.

Technological upgrades like the fully automated trading platform and systems for clearing, settlement, and depository functions have made markets more efficient and accessible, reducing costs and barriers for both institutional and retail investors.

(b) Importance of capital market funds for Ghana’s economy

Capital markets are vital for Ghana’s economic growth for several reasons including: Mobilizing Long-Term Capital, Equity markets and bond issuances allow companies and governments to raise long-term financing beyond short-term bank loans. This supports infrastructure projects, business expansion, and development programs without overreliance on foreign debt.

Diversification and risk sharing

Mutual funds and collective investment schemes provide diversification for individual investors. Instead of investing in a single stock or instrument, a pooled fund spreads risk across multiple assets. This can improve stability for household savings and encourage long-term investment habits.

Deepening financial inclusion

By reducing barriers to entry and offering a range of products, capital markets bring more participants into the formal financial system. Broader participation strengthens savings mobilization and embeds more citizens in productive economic activity.

Market discipline and efficiency

Capital markets impose market discipline on firms and public institutions. Transparent pricing and disclosure requirements help improve corporate governance and financial performance.

(c) VAT Treatment of Capital Market Services: Old vs New Regime

A significant issue affecting the cost of capital market participation in Ghana relates to Value Added Tax (VAT) treatment of services provided by trustees, fund managers, brokers, financial advisors, and other service providers.

Under the Value Added Tax Act, 2013 (Act 870) as amended by the Value Added Tax (Amendment) Act 2019, (Act 1005), certain financial services were specifically exempt from VAT.

Paragraph 19 exempted financial services as defined by the Act and paragraph 28 also exempted management fees charged by a local fund manager for management of a licensed private
equity fund, a venture capital fund or a mutual fund from VAT.

These exemptions meant that trustees, advisors, and fund managers were not required to charge VAT on their fees, keeping costs lower for investors.

This exemption was a deliberate policy choice as it recognized that financial intermediation in capital markets serves a broader economic purpose and that adding VAT on top of management and advisory fees could raise the cost of investment products and deter participation.

With the new VAT regime, the Value Added Tax Act, 2025 (Act 1151) repealed Act 870 and brought a significant shift in how VAT applies. Under Act 1151, the VAT base has been broadened, and many financial services which hitherto were exempted are now treated as taxable supplies per the combined application of sections 1, 2, 4, 5, 6, 22, 33, 35, and the first schedule.

This means that services provided by trustees, fund managers, brokers, and financial advisors have lost their exemptions status and now attract VAT at 15% and its associated levies of NHIL 2.5% and GETFund 2.5%.


Conclusion

From progress made by Ghana in its Capital Market development, an imposition of VAT and its associated levies by Act 1151 could not be drafters’ error but rather a policy decision to increase the VAT base. Under the old VAT Act (870), services provided by fund managers, trustees, brokers, and advisors were exempt from VAT, helping lower costs and attract investors.

The removal of those exemptions under Act 1151 creates barriers and increases costs, which can deter participation and undermine the growth of capital markets.

For Ghana’s economy to continue benefiting from deeper financial markets, policymakers should consider reinstating targeted VAT exemptions for core capital market services. This would make investment products more affordable, encourage broader participation, and support long-term economic growth.

Recommendations

I recommend among the following for consideration by stakeholders:

a) The SEC should formally engage the Ministry of Finance and GRA with data on how VAT on fund management, trusteeship, brokerage, and advisory services affects investor returns, fund costs, and market participation to make a case for reinstatement of the exemption through regulations.

b) Ghana Revenue Authority (GRA) should publish clear practice notes on:

i. What specific services in the industry are taxable?

ii. How bundled services should be treated.

iii. How cross-border advisory and management services should be handled, to reduces disputes and compliance uncertainty.

c) To the Ministry of Finance, I must say that, the capital market is a key channel for mobilizing long-term domestic savings and taxing the core services that enable savings and investment is counterproductive to fiscal sustainability in the medium term.

The Ministry should consider restoring the VAT exemptions through reintroduction of narrow exemptions or zero-rating for:

i. Management of licensed mutual funds and unit trusts.

ii. Trusteeship for collective investment schemes.

iii. Core brokerage services on licensed markets.

iv. Providers of investment advisory services.

This will mirror the policy intent under the old regime and aligns with capital market development goals.

d) To the players in the industry, as it stands, Act 1151 requires them to register and charge the taxes effective 1st January 2026 and the first return and payment is expected to be filed latest by 28th February 2026 for January reporting period.

Efforts should be made to align their invoicing system to reflect the new taxes and give extensive customer education on this additional tax cost they may see on their bills if the taxes are to be passed on to the
customers to ensure transparency.

e) To retail and institutional investors, please note that, in the absence of any last-minute intervention by the Ministry of Finance or the GRA, the service charges you pay for capital market investment services may increase by up to 20 percent due to the imposition of VAT, NHIL, and GETFund levies.