Ghana Faces GH¢7.1 Billion Revenue Shortfall Following Tax Repeals

The Institute for Economic Research and Public Policy (IERPP) has warned that Ghana’s 2025 tax reforms, aimed at easing economic pressure on households and businesses, could result in a revenue shortfall of between GH¢5.5 billion and GH¢7.1 billion.

The projections, announced by Professor Isaac Boadi, Executive Director of IERPP and Dean of the Faculty of Accounting and Finance, highlight the fiscal risks posed by a series of tax abolitions outlined in the government’s recent policy statement.

According to IERPP, while the reforms may bring temporary relief, the absence of compensatory fiscal measures could destabilize public finances and compromise economic resilience in the long term. Among the most significant repeals is the abolition of the 1% Electronic Transfer Levy (E-Levy), which had generated GH¢1.46 billion in 2023—well below its GH¢4.7 billion target. Its repeal alone is expected to cost the 2025 budget approximately GH¢517.7 million.

The 10% withholding tax on lottery winnings, commonly known as the betting tax, has also been scrapped. Although this move could revitalize a gaming sector that shrank by 15% in revenue over the past year, it represents a symbolic but notable loss of GH¢80 million to GH¢100 million in tax revenue.

The government has additionally repealed the GH¢100 annual Emission Levy on vehicles and industrial operations. This levy, which contributed GH¢450 million annually, was intended to incentivize environmental responsibility. Its removal may marginally reduce production costs for manufacturers but raises concerns over Ghana’s environmental commitments, particularly following a 5% rise in national carbon emissions last year.

Motorists will also benefit from the elimination of VAT on motor vehicle insurance premiums. This measure, expected to lower premiums by up to 20%, will cost the government between GH¢1.4 billion and GH¢2.8 billion in revenue. Similarly, abolishing the 1.5% withholding tax on unprocessed gold purchases by small-scale miners—part of an effort to reduce smuggling and formalize the sector—will forfeit an estimated GH¢297 million in annual taxes.

Further, the repeal of the COVID-19 Health Recovery Levy, a 1% surcharge on VAT and NHIL that raised GH¢2.5 billion to GH¢3.0 billion annually, is projected to eliminate GH¢2.8 billion in public health-related revenue for 2025. The levy previously funded 60% of the country’s ICU bed expansions from 2021 to 2024.

IERPP warns that these repeals, while offering economic relief, create a substantial fiscal gap that could deepen Ghana’s projected 8.5% GDP deficit for 2025. To mitigate this, the institute proposes a series of targeted interventions, including the introduction of a 5% luxury tax on high-end goods, which could generate GH¢800 million annually. Enhanced enforcement of property taxation is also expected to raise an additional GH¢1.2 billion.

To compensate for the loss of the emissions levy, the IERPP recommends exploring carbon credit markets, leveraging Ghana’s extensive forest cover to support green financing initiatives. The institute further advocates for export diversification through value-added cocoa and processed goods under the AfCFTA framework and recommends allocating 5% of mining royalties to a dedicated health infrastructure fund.

Moreover, tying tax exemptions to small business formalization and encouraging digital payment adoption may help broaden the tax base and foster long-term economic inclusivity.

While the proposed reforms offer a path toward easing immediate economic strain, the IERPP stresses that without strategic countermeasures, Ghana may face sustained fiscal imbalances. The challenge now lies in balancing social relief with sustainable public finance management in an increasingly volatile global economic environment.