{"id":46823,"date":"2025-04-08T18:59:07","date_gmt":"2025-04-08T18:59:07","guid":{"rendered":"https:\/\/sotnews.agency\/?p=46823"},"modified":"2025-04-08T18:59:07","modified_gmt":"2025-04-08T18:59:07","slug":"fiscal-shock-ahead-ierpp-predicts-gh%c2%a27-1-billion-revenue-drop-from-tax-reforms","status":"publish","type":"post","link":"https:\/\/sotnews.agency\/?p=46823","title":{"rendered":"Fiscal shock ahead: IERPP predicts GH\u00a27.1 billion revenue drop from tax reforms"},"content":{"rendered":"
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\n \t<\/i> Read Time:<\/span>5 Minute, 56 Second <\/div>\n\n <\/div>
\"Fiscal<\/p>\n

Prof. Isaac Boadi, Executive Director of the Institute for Economic Research and Public Policy (IERPP) and Dean of the Faculty of Accounting and Finance, has cautioned that the government\u2019s proposed 2025 tax reforms, aimed at alleviating financial pressures on households and businesses, could cost Ghana between GH\u00a25.5 billion and GH\u00a27.1 billion in lost revenue, based on recent projections.<\/p>\n

While acknowledging the short-term relief these measures may provide through reduced taxes on essentials and low-income earners, Prof. Boadi stressed that failing to urgently implement compensatory fiscal strategies could destabilize public finances and undermine long-term economic resilience.<\/p>\n

He further emphasizes that IERPP emphasizes that without offsetting revenue streams, Ghana risks trading temporary relief for prolonged fiscal instability.<\/p>\n

In paragraph 258 (ii), the minister stated, \u201cWe will abolish the Electronic Transfer Levy (E-Levy) of 1%\u201d. The government has repealed the 1% Electronic Transfer Levy (E-Levy), fulfilling the minister\u2019s pledge. This decision is expected to rejuvenate Ghana\u2019s digital finance ecosystem. Mobile money transactions, which fell by 30% after the levy\u2019s 2022 introduction, are forecast to recover by 25\u201340%, enhancing financial access for the 58% of Ghanaians outside formal banking. <\/p>\n

For example, MTN Ghana\u2019s MoMo transactions dropped 22% between 2022 and 2023, a decline likely to reverse post-repeal, particularly aiding SMEs dependent on digital payments. However, fiscal risks loom: the E-Levy generated GH\u00a21.46 billion in 2023 against a GH\u00a24.7 billion target. With its abolition, the 2025 budget implicitly loses approximately GH\u00a2517.7 million, exacerbating the projected fiscal deficit of 8.5% of GDP.<\/p>\n

In paragraph 258 (i), the minister concludes, \u201cWe will abolish the 10% withholding tax (WHT) on winnings from lottery, otherwise known as the \u2018Betting Tax\u201d. The removal of the 10% withholding tax on lottery winnings offers relief to Ghana\u2019s gaming sector, which saw revenues shrink by 15% from 2023 to 2024. Firms like LottoHub, which cut 500 jobs post-tax implementation, may now rebound. However, public health concerns emerge, as gambling addiction affects 4% of adults, and the repeal lacks parallel investments in regulatory safeguards. While the 2023 gaming industry contributed GH\u00a278 million in taxes, its 2025 projections (GH\u00a280\u2013100 million) suggest a marginal but symbolic loss of 0.042\u20130.053% in total tax revenue.<\/p>\n

In paragraph 258(iii), the minister noted, \u201cWe will abolish the Emission Levy on industries and vehicles\u201d. Scrapping the GH\u00a2100\/year Emission Levy on vehicles and industries eases costs for manufacturers like Ghacem, which paid GH\u00a212 million annually, potentially lowering cement prices by 2\u20133% and aiding infrastructure development. However, this risks environmental progress: Ghana\u2019s carbon emissions rose 5% in 2023, and abolishing the levy undermines green incentives, conflicting with COP28 climate pledges. The levy, introduced in 2023, was projected to raise GH\u00a2450 million annually, a revenue stream now forfeited.<\/p>\n

In paragraph 258 (iv), the minister noted, \u201cWe will abolish the VAT on motor vehicle insurance policy\u201d. Eliminating VAT on motor vehicle insurance premiums\u2014estimated at 1\u20132% of total VAT collections (GH\u00a2140.98 billion in 2024)\u2014will reduce annual revenue by GH\u00a21.4\u20132.8 billion. While premiums could drop by 20% (e.g., from GH\u00a21,150 to GH\u00a21,000 for a GH\u00a21,000 policy), easing costs for drivers, the fiscal gap widens, compounding pressure on public finances.<\/p>\n

In paragraph 258 (v), the minister adds, \u201cWe will abolish the 1.5% withholding tax on the winning of unprocessed gold by small-scale miners. The State continues to lose huge foreign exchange from the small-scale mining sector due to various factors. As part of the Ghana Gold Board (GOLDBOD) initiative, the government will remove the withholding tax on purchases of unprocessed gold to free up the market and encourage small-scale miners to sell their gold to the relevant State Institutions to curtail smuggling. Abolishing the 1.5% tax on small-scale gold purchases aims to curb smuggling and formalize a sector employing over 1 million Ghanaians. Pilot regions reported 40% compliance improvements after tax relief discussions. However, 30% of gold still leaks through informal channels, highlighting enforcement gaps. With 2024 gold revenue at GH\u00a219.8 billion, the tax repeal sacrifices GH\u00a2297 million in potential annual revenue.<\/p>\n

The government\u2019s decision to scrap the COVID-19 Health Recovery Levy, outlined in paragraph 288(i), eliminates a 1% VAT\/NHIL surcharge that contributed GH\u00a22.5\u20133.0 billion annually to public coffers (based on 2023 figures), with 2025 revenue projections pegged at GH\u00a22.8 billion. While this relieves financial strain on businesses such as Fan Milk Ltd., which faced annual charges of GH\u00a25 million, it threatens critical healthcare infrastructure. The levy previously funded 60% of ICU bed expansions between 2021 and 2024, raising alarms about diminished capacity to address future pandemics. This repeal underscores the tension between fiscal relief for businesses and sustaining long-term public health resilience.<\/p>\n

The figure below depicts the list of taxes and the corresponding amount to be lost in terms of tax revenue.<\/p>\n

According to the institute, it is crucial to note that the total revenue loss from repealing these taxes is ~GH\u00a25.5\u20137.1 billion, which aligns with the government\u2019s emphasis on spending-led fiscal adjustment (Paragraph 245).<\/p>\n

Summary Table<\/strong><\/p>\n

Tax Repealed<\/strong><\/p>\n

Estimated Contribution to 2025 Domestic Revenue (GH\u00a2)<\/p>\n

Electronic Transfer Levy (E-Levy)<\/strong>
500 million<\/p>\n

10% Betting Tax<\/strong>
80\u2013100 million<\/p>\n

Emission Levy<\/strong>
450 million<\/p>\n

VAT on Motor Vehicle Insurance<\/strong>
1.4\u20132.8 billion<\/p>\n

1.5% Withholding Tax on Gold<\/strong>
297 million<\/p>\n

COVID-19 Health Recovery Levy<\/strong>
2.8 billion<\/p>\n

Total effect of tax repealed<\/strong><\/p>\n

GH\u00a25.5\u20137.1 billion<\/p>\n

Figure 2: List of repealed taxes, 2025<\/strong><\/p>\n

IERPP\u2019s advice to the government<\/strong><\/p>\n

To address Ghana\u2019s looming fiscal challenges, the Institute for Economic Research and Policy Promotion (IERPP) has outlined a comprehensive strategy to offset projected revenue losses while advancing sustainable development. Central to this plan is introducing a 5% luxury tax on high-end vehicles, electronics, and luxury goods, which could raise GH\u00a2800 million annually by targeting wealthier demographics without straining low-income households. Alongside this, the IERPP advocates for stricter enforcement of property taxes to generate GH\u00a21.2 billion, addressing inefficiencies in local revenue collection.<\/p>\n

To promote environmental sustainability, Ghana\u2019s 6.5 million hectares of forests could be leveraged through a carbon credit market, replacing the contentious emissions levy while funding green initiatives. The institute also emphasizes diversifying exports by prioritizing processed cocoa and value-added goods to African markets via the AfCFTA, reducing dependency on volatile U.S. and European demand. Additionally, redirecting 5% of mining royalties (GH\u00a21.8 billion in 2024) to a Health Infrastructure Fund aims to modernize healthcare in under-served regions.<\/p>\n

Finally, linking tax exemptions to small business formalization and digital payment adoption seeks to broaden the tax base, foster inclusive growth, and accelerate Ghana\u2019s digital transition. Together, these measures aim to balance fiscal stability with equitable and sustainable development.<\/p>\n

\u2013<\/p>\n

IERPP | Contact: research@ierpp.org | Accra, Ghana
\u201cInclusive Policies for Resilient Economies\u201d<\/p>\n<\/div>\n

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Prof. Isaac Boadi, Executive Director of the Institute for Economic Research and Public Policy (IERPP) and Dean of the Faculty of Accounting and Finance, has cautioned that the government\u2019s proposed… <\/p>\n","protected":false},"author":1,"featured_media":46824,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":{"facebook_2277560469115098_106292521332774":"","twitter_aToxNzczMzI3Njk4OTg4ODUxMjAxOw==_1773327698988851200":""},"rop_publish_now_history":[],"rop_publish_now_status":"pending","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-46823","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/sotnews.agency\/index.php?rest_route=\/wp\/v2\/posts\/46823","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sotnews.agency\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sotnews.agency\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sotnews.agency\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sotnews.agency\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=46823"}],"version-history":[{"count":0,"href":"https:\/\/sotnews.agency\/index.php?rest_route=\/wp\/v2\/posts\/46823\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sotnews.agency\/index.php?rest_route=\/wp\/v2\/media\/46824"}],"wp:attachment":[{"href":"https:\/\/sotnews.agency\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=46823"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sotnews.agency\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=46823"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sotnews.agency\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=46823"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}