Recent analysis paints a sobering picture for policy makers in Ghana. Projected reforms aimed at alleviating the financial stress on its populace and businesses are estimated to drain the nation’s coffers, leading to a revenue loss somewhere between GH¢5.5 billion and GH¢7.1 billion. But what does this mean for the nation’s economic blackboard?
While many acknowledge potential advantages in the short term, such as tax reductions on pivotal goods and services for low-income households, Professor Boadi, a voice of caution, issues a sober reminder. “The government must act swiftly, instilling alternative fiscal strategies to offset these losses,” he declared. One wonders if the government can afford to sweep such fiscal realities under the rug.
“Should the government neglect implementing compensatory revenue measures, the consequences could potentially compromise public finance health and dull Ghana’s economic resilience long-term,” he cautioned.
Reflecting on this, the Institute for Economic Research and Policy Planning has issued a stark warning. Absent revenue streams could leave Ghana trading short-term relief for looming fiscal uncertainties. It raises an important question: Is financial comfort today worth economic headaches tomorrow?
E-Levy abolishment to revive digital payments
In a significant move covered in paragraph 258 (ii) of the 2025 budget document, the government has nullified the 1% Electronic Transfer Levy (E-Levy). This reversal is anticipated to invigorate the digital finance scene in Ghana. Previously, when introduced in 2022, mobile money usage took a hit, dropping by 30%. However, current projections suggest a rebound between 25–40%, paving the way for increased accessibility to financial services for around 58% of Ghanaians who lack formal banking services. Is this the dawn of a digital financial era for Ghana?
“We will abolish the Electronic Transfer Levy (E-Levy) of 1%,” the Minister emphatically declared.
Yet here lies a dilemma. The repeal poses a revenue conundrum. In 2023, the E-Levy raked in GH¢1.46 billion, albeit missing the aspirational GH¢4.7 billion target. Its removal now projects a budget shortfall of approximately GH¢517.7 million in 2025, inflating an already worrying fiscal deficit of 8.5%.
Betting tax removed
In paragraph 258 (i), a cheering announcement came as the government decided to abolish the 10% withholding tax on lottery winnings, known colloquially as the “Betting Tax.”
“We will eliminate the 10% withholding tax (WHT) on lottery winnings,” declared the determined Minister.
For the gaming industry, which saw a 15% revenue dip from 2023 to 2024, this is promising news. Companies like LottoHub, which had to cut 500 jobs, may now have room to thrive again. Yet, with relief comes responsibility. Worries linger around gambling addiction, impacting approximately 4% of adults. The repeal, lacking public health safeguards, could deepen these challenges even as the industry contributed GH¢78 million in taxes in 2023.
Emission Levy scrapped
Paragraph 258 (iii) from the budget narrative highlights the removal of the GH¢100 annual Emission Levy on vehicles and industrial operations.
“We will abolish the Emission Levy on industries and vehicles,” the Minister pronounced confidently.
This decision is set to cut operational costs for industries such as Ghacem, previously bearing an annual GH¢12 million levy bill. Assumptions suggest a potential 2–3% drop in cement prices, possibly sparking infrastructure advancements. However, a key concern hovers over Ghana’s climate promises made at international forums like COP28, which now face scrutiny. Carbon emissions spiked by 5% in 2023, and with the levy gone—projected to churn out GH¢450 million annually—environmental checks risk being further compromised.
VAT on Vehicle Insurance premiums dropped
In another stride towards easing vehicle operational costs, paragraph 258 (iv) covers the government’s decision to abolish VAT on motor vehicle insurance premiums.
“We will annul the VAT on motor vehicle insurance policies,” declared the Minister.
The expected outcome is a decline in insurance premiums by 20%—for instance, reducing a GH¢1,150 premium to GH¢1,000 on standard coverage. Nevertheless, VAT revenues, positioned at GH¢140.98 billion in 2024, face a potential shortfall of GH¢1.4 to GH¢2.8 billion, further gap-widening the fiscal landscape.
Tax on unprocessed gold repealed to fight smuggling
In endeavors to streamline the small-scale mining sector, the government declared its decision to abolish the 1.5% withholding tax on raw gold sales.
“We will abolish the 1.5% withholding tax on the winning of unprocessed gold by small-scale miners,” the Minister announced in paragraph 258 (v).
This initiative, under the Ghana Gold Board (GOLDBOD), aims to foster legitimate trade and curb illegal exports. In pilot zones, compliance surged by 40% following initial tax relief propositions. However, the shadow of informal trading still lingers, with 30% of gold production sneaking out through non-transparent channels. Attracting GH¢19.8 billion in 2024, the gold sector faces a GH¢297 million yearly fiscal impact post-tax repeal.
Balancing relief with responsibility
In his concluding thoughts, Professor Boadi underscored that while these reforms might provide temporary solace to citizens and businesses, overlooking their long-term fiscal ripple effects would be imprudent.
“These measures enjoy political favor but are economically precarious if unaccompanied by prudent fiscal stewardship,” he stressed.
As Ghana strides forward in its 2025 economic blueprint, the call for astute rebalance between immediate social relief and sustainable public finance cannot be underestimated or ignored.
