Ghana could face a significant fiscal shock following the government’s sweeping 2025 tax reforms, with revenue losses projected to reach up to GH¢7.1 billion, according to the Institute for Economic Research and Public Policy (IERPP).
Prof. Isaac Boadi, Executive Director of IERPP and Dean of the Faculty of Accounting and Finance, has cautioned that while the tax reforms were designed to ease financial burdens on households and businesses, the long-term fiscal cost could destabilize the country’s public finances if not strategically addressed.
“The reforms offer short-term relief, especially for low-income earners and small businesses, but without well-crafted compensatory measures, Ghana risks prolonged fiscal instability,” Prof. Boadi said in a policy brief issued over the weekend.
The IERPP’s analysis reveals that the government’s decision to repeal multiple taxes, including the controversial Electronic Transfer Levy (E-Levy), betting tax, and COVID-19 Health Recovery Levy, will significantly dent domestic revenue streams. The estimated shortfall, ranging between GH¢5.5 billion and GH¢7.1 billion, aligns with the government’s stated goal of a “spending-led fiscal adjustment,” as noted in Paragraph 245 of the 2025 Budget Statement.
Breakdown of repealed taxes/ revenue impacts
Among the most impactful changes is the abolition of the 1% E-Levy, as detailed in Paragraph 258(ii) of the budget. While the move is expected to boost mobile money usage—projected to rebound by 25–40% after a 30% drop post-introduction in 2022—it represents a revenue loss of approximately GH¢517.7 million in 2025 alone. In 2023, the levy raised just GH¢1.46 billion, far below the GH¢4.7 billion target.
Also scrapped is the 10% withholding tax on lottery winnings (Paragraph 258(i)), intended to revive a shrinking gaming sector. While this may stimulate economic activity and employment, it results in a marginal revenue loss of GH¢80–100 million and raises public health concerns due to rising gambling addiction, which affects an estimated 4% of adults.
Environmental financing also takes a hit with the removal of the Emission Levy (Paragraph 258(iii)). Introduced in 2023 to support Ghana’s green transition, the levy generated GH¢450 million annually. While the repeal may lower costs for firms such as Ghacem—potentially reducing cement prices by 2–3%—it undermines climate commitments made under COP28, as Ghana’s carbon emissions rose 5% in 2023.
Motorists will also benefit from the abolition of VAT on motor vehicle insurance premiums (Paragraph 258(iv)), which could reduce annual insurance costs by 20%. However, this measure alone may cost the state between GH¢1.4 billion and GH¢2.8 billion—representing up to 2% of total VAT revenue in 2024.
Small-scale miners have also gained relief from the repeal of the 1.5% withholding tax on unprocessed gold (Paragraph 258(v)), a move meant to encourage formalization and reduce smuggling. Yet this comes at the cost of GH¢297 million in potential revenue, in a sector that still sees 30% of its gold output pass through informal channels.
Crucially, the abolition of the COVID-19 Health Recovery Levy (Paragraph 288(i)) eliminates a GH¢2.8 billion revenue stream previously used to fund critical health infrastructure, including 60% of Ghana’s ICU expansions between 2021 and 2024. While welcomed by businesses such as Fan Milk Ltd.—which paid an annual GH¢5 million levy—the move raises serious concerns about Ghana’s pandemic preparedness.
IERPP’s proposed fiscal recovery measures
To cushion the economy from the looming revenue shock, IERPP has outlined a series of counterbalancing measures that prioritize fiscal sustainability, inclusivity, and economic diversification.
Key among these is a proposed 5% luxury tax on high-end vehicles, electronics, and goods, which could raise GH¢800 million annually. The institute also advocates enhanced property tax enforcement, with potential revenues of GH¢1.2 billion, and carbon credit trading, leveraging Ghana’s 6.5 million hectares of forest to attract green financing.
Additionally, the institute calls for diversifying export markets, particularly through value-added cocoa products under AfCFTA, to reduce dependency on Western demand. To boost healthcare infrastructure, IERPP proposes redirecting 5% of mining royalties—approximately GH¢1.8 billion in 2024—into a dedicated Health Infrastructure Fund for underserved communities.
The think tank also recommends linking tax exemptions to digital payment adoption and formalization of informal businesses, expanding the tax base while promoting inclusive economic growth.
“We must avoid a short-sighted rush toward tax relief without firm foundations for recovery. The path forward must balance compassion with competence,” Prof. Boadi added.
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