By: Isaac BOADI(Prof)
Ghana could face a revenue shortfall of up to GH¢7.1 billion in 2025 as a result of proposed tax reforms, the Institute for Economic Research and Public Policy (IERPP) has projected.
The reforms, aimed at easing financial pressures on households and businesses, include the repeal of several taxes.
While the measures are expected to bring short-term relief, the IERPP has cautioned that they could threaten the country’s fiscal stability if not backed by strong alternative revenue strategies.
“We estimate the total revenue loss from the repeal of these taxes to fall between GH¢5.5 billion and GH¢7.1 billion,” said Prof. Isaac Boadi, Executive Director of IERPP and Dean of the Faculty of Accounting and Finance. “While these changes may ease the burden on households and businesses, they pose significant risks to Ghana’s public finances if not managed with appropriate compensatory measures.”
Key Tax Repeals and Fiscal Implications
Among the reforms is the abolition of the 1% Electronic Transfer Levy (E-Levy). The levy, introduced in 2022, led to a 30% decline in mobile money transactions. Its repeal is expected to revive the digital finance sector and promote financial inclusion.
“With over 58% of Ghanaians still outside the formal banking sector, removing the E-Levy could boost financial access,” Prof. Boadi noted. “But this also means a loss of GH¢517.7 million in revenue for the 2025 budget.”
The E-Levy generated GH¢1.46 billion in 2023, far short of its GH¢4.7 billion target.
The removal of the 10% withholding tax on lottery winnings, also announced by the finance minister, is seen as a move to revitalise the gaming industry, which experienced a 15% drop in revenues between 2023 and 2024.
“Companies like LottoHub had to lay off workers after the tax was introduced. This repeal may help the sector rebound,” Prof. Boadi said. “However, there are public health implications, especially as gambling addiction affects an estimated 4% of adults. We’re concerned the policy change lacks regulatory safeguards.”
The scrapping of the Emission Levy—a GH¢100 annual charge on vehicles and industries—aims to reduce production costs and support manufacturing. Companies like Ghacem, which reportedly paid GH¢12 million annually under the levy, may see cost savings reflected in lower cement prices.
“This could lower cement prices by 2–3%, aiding infrastructure development,” Prof. Boadi explained. “But on the flip side, Ghana’s carbon emissions rose by 5% in 2023. Eliminating the levy sends mixed signals regarding our COP28 climate commitments.”
The levy had been projected to raise GH¢450 million annually.
Similarly, the removal of VAT on motor vehicle insurance premiums could lower insurance costs for drivers by about 20%, but at a steep cost to the state. IERPP estimates that the change could reduce VAT revenue by GH¢1.4 billion to GH¢2.8 billion in 2025.
In the gold sector, government plans to abolish the 1.5% withholding tax on unprocessed gold sold by small-scale miners. Authorities hope the measure will reduce smuggling and boost sales through official channels.
“Informal gold exports are bleeding Ghana of valuable foreign exchange,” Prof. Boadi said. “Removing the tax may encourage formalization, but it also means forfeiting up to GH¢297 million in revenue annually.”
The government will also scrap the 1% COVID-19 Health Recovery Levy, a surcharge that brought in an estimated GH¢2.5 to GH¢3 billion annually. The levy funded critical health projects, including about 60% of ICU bed expansions between 2021 and 2024.
“Eliminating this levy could weaken our capacity to handle future public health emergencies,” said Prof. Boadi. “We understand the need to ease business costs, but the trade-off must be carefully managed.”
IERPP’s Fiscal Recommendations
To address the looming fiscal gap, IERPP has outlined several policy alternatives designed to preserve macroeconomic stability while promoting inclusive growth.
The institute proposes the introduction of a 5% luxury tax on high-end vehicles, electronics, and luxury goods, aimed at wealthier consumers.
“This could raise up to GH¢800 million annually without burdening the poor,” Prof. Boadi suggested.
IERPP also recommends enhanced enforcement of property taxes, which could yield GH¢1.2 billion if collection systems are improved.
To replace the Emission Levy, the institute suggests leveraging Ghana’s 6.5 million hectares of forests by participating in the global carbon credit market.
“This would align better with our climate goals while providing a new, sustainable revenue stream,” said Prof. Boadi.
On trade, the institute encourages Ghana to diversify exports, particularly through the African Continental Free Trade Area (AfCFTA).
“Focusing on processed cocoa and other value-added goods will reduce reliance on the volatile U.S. and European markets,” he said.
Additionally, IERPP proposes redirecting 5% of annual mining royalties—equivalent to GH¢1.8 billion in 2024—towards a new Health Infrastructure Fund to support underserved regions.
To boost the tax base, the institute further recommends linking tax exemptions to small business formalization and digital payment adoption.
“These reforms can help Ghana strike a balance between providing relief and maintaining fiscal discipline,” Prof. Boadi concluded. “A strategic, well-targeted approach is key to achieving long-term economic resilience.”
