By Felix Larry Essilfie
The Government of Ghana’s decision to abolish the electronic transaction levy (e-levy) and betting tax has spurred heated debate among economists, financial analysts, and policymakers.
One faction lauds this policy shift for the immediate economic relief it offers to citizens, particularly those who have long criticized these taxes as regressive and inequitable.
Another faction, however, views the move with skepticism, cautioning that it may exacerbate fiscal pressures by reducing government revenues, thereby undermining the sustainability of public expenditures and Ghana’s commitments under its International Monetary Fund (IMF) program.
While such concerns warrant attention, I argue that removing these levies is a prudent step toward creating a more equitable tax system and fostering public trust in fiscal governance. Moreover, by implementing innovative and efficient revenue strategies, the government can offset the resultant shortfall and maintain fiscal stability.
Ghana’s fiscal challenges are well-documented. According to the Ministry of Finance, total government revenue in 2021 stood at GH¢67.9 billion (approximately 13% of GDP), while expenditures soared to GH¢112.5 billion, resulting in a deficit of GH¢44.6 billion. The e-levy and betting tax were introduced to address these imbalances.
However, their yields fell short of expectations. For instance, the e-levy, initially set at 1.75% before being reduced to 1.5%, was projected to generate GH¢6.9 billion in its first year but delivered significantly less. Reduced transaction volumes and compliance challenges contributed to this underperformance. Additionally, both taxes faced widespread criticism for their regressive nature, disproportionately burdening lower-income individuals and discouraging digital financial transactions, which are vital for promoting financial inclusion.
Scrapping these levies is therefore a move toward relieving economic pressures on the most vulnerable groups. Mobile money users, many of whom fall within the informal sector, will benefit directly from reduced transaction costs.
The removal of the betting tax also alleviates financial pressures on younger Ghanaians, many of whom turn to betting as a supplementary source of income amid limited job opportunities. Beyond economic relief, this decision signals the government’s commitment to addressing inequities in taxation and fostering a fairer fiscal environment.
However, achieving fiscal sustainability in the wake of this policy shift requires strategic reforms to mobilize alternative revenue streams and optimize expenditure management.
A critical area for reform is expanding the tax base. Ghana’s informal economy employs about 80% of the workforce yet contributes less than 5% to direct tax revenue. Formalizing this sector is essential for increasing the government’s revenue without overburdening existing taxpayers.
Digital identification systems such as the Ghana Card can be leveraged to integrate informal businesses into the tax net. Simplified tax regimes tailored to small and microenterprises can further ease compliance and incentivize formalization. Kenya’s iTax platform exemplifies the potential of digital solutions in this regard, having significantly reduced administrative barriers and increased transparency in tax filings.
Another underutilized source of revenue is property taxation. Ghana’s property tax currently contributes less than 0.5% of GDP, far below the sub-Saharan African average of 1–2%.
Modernizing property valuation processes through geospatial mapping and technology-driven assessments can enhance revenue collection at the local government level. Countries such as South Africa have demonstrated how well-structured property tax systems can sustainably fund infrastructure and social services without disproportionately relying on central government transfers.
Targeting the growing digital economy presents another promising avenue for revenue mobilization. Ghana can introduce taxes on digital services offered by multinational technology companies operating within its borders. Properly designed, these taxes can generate significant revenue without stifling innovation or placing undue burdens on local startups.
Nigeria’s approach to regulating and taxing digital platforms and Kenya’s Digital Service Tax are instructive examples. Such policies allow governments to capture value from global digital giants while fostering fair competition between multinational corporations and domestic enterprises.
Improving efficiency in tax administration is equally important. Ghana’s digitization efforts, particularly through platforms such as Ghana.gov, are a step in the right direction. Automation and e-governance can reduce leakages, curb corruption, and streamline tax collection.
World Bank studies indicate that countries with robust e-government systems experience compliance rate increases of 20–30%. By integrating data from agencies like the Registrar-General’s Department, Social Security and National Insurance Trust (SSNIT), and the Driver and Vehicle Licensing Authority (DVLA), the government can build a comprehensive taxpayer database, enabling better enforcement and minimizing evasion.
Rwanda’s Electronic Billing Machine system, which ensures real-time invoicing and accurate tax assessments, exemplifies how digital tools can transform tax administration and boost compliance.
Curbing corruption and addressing wasteful public expenditure are indispensable to enhancing fiscal efficiency. Surveys conducted by the Ghana Center for Democratic Development reveal that public distrust in government stems partly from perceptions of mismanagement and corruption.
Transparent procurement processes, regular independent audits, and whistleblower protections can mitigate these concerns. When taxpayers see that their contributions are used effectively to fund essential services and development projects, trust in the tax system improves, fostering voluntary compliance.
In addition to addressing inefficiencies, rationalizing government expenditure is vital. Performance-based budgeting, which links allocations to measurable outcomes, can enhance accountability and ensure that resources are directed to high-impact programs. For example, Ministries, Departments, and Agencies can be required to meet specific performance benchmarks to justify their funding.
Public-Private Partnerships (PPPs) also present opportunities to finance large-scale projects without relying solely on public funds. Ghana’s successful collaboration with private entities for the Tema Port expansion illustrates the viability of this approach. Similarly, reducing poorly targeted subsidies while safeguarding essential support for vulnerable populations can free up fiscal space for critical investments.
Innovative financing mechanisms can complement these structural reforms. Green bonds, for instance, have gained traction in emerging economies as a tool to fund environmentally sustainable projects. Countries such as Chile and Indonesia have successfully issued green bonds to finance renewable energy, sustainable agriculture, and climate-resilient infrastructure.
Ghana can replicate this model to attract environmentally conscious investors while addressing pressing development needs. Diaspora bonds offer another promising avenue. With its large diaspora population, Ghana has the potential to mobilize substantial resources from Ghanaians living abroad by issuing bonds tied to infrastructure or social projects. Nigeria’s success with diaspora bonds demonstrates the efficacy of this approach.
Sovereign Wealth Funds (SWFs), though more commonly associated with resource-rich countries, could also play a role in stabilizing Ghana’s fiscal outlook. By investing a portion of natural resource revenues or budget surpluses during economic booms, Ghana can build a buffer against future shocks and ensure long-term fiscal sustainability. While this requires prudent management, the potential benefits to economic resilience are significant.
Lessons from other African countries underscore the feasibility of these reforms. Kenya, for instance, increased tax revenues by an average of 17% annually between 2017 and 2021 by implementing digital taxation and modernizing its tax system.
Rwanda, through its simplified tax procedures and widespread adoption of electronic billing systems, has achieved a tax-to-GDP ratio of around 17%, among the highest in sub-Saharan Africa. These examples demonstrate that innovative, well-calibrated reforms can enhance compliance and revenue generation while promoting fairness and equity.
The decision to scrap the e-levy and betting tax should be viewed not as a retreat from sound fiscal management but as an opportunity to reimagine Ghana’s tax regime. By eliminating these levies, the government alleviates economic pressures on ordinary citizens and fosters public trust.
At the same time, it is incumbent upon policymakers to adopt bold reforms that broaden the tax base, improve administrative efficiency, and optimize public expenditures. Achieving these goals requires a combination of political will, institutional capacity, and active public engagement.
Ultimately, this policy shift offers Ghana a chance to realign its taxation framework with principles of equity, transparency, and growth. When citizens perceive that taxes are levied fairly and used responsibly, compliance improves, and public trust deepens.
Leveraging technology, fostering accountability, and learning from international best practices can help Ghana build a robust and inclusive fiscal system. The removal of the e-levy and betting tax, if coupled with transformative reforms, holds the potential to create a more prosperous and equitable economic landscape for all Ghanaians.
Felix is the Executive Director – Institute of Development and Economic Research (IDER
Senior Principal Consultant – African Institute for Extractive Industries (AIEI)
Email: [email protected]
