Removing the E-Levy and COVID-19 tax is projected to result in a GHS 6.4 billion revenue loss in 2025 alone.
The ambitious proposal by the President-elect, John Dramani Mahama to have these tax lines scrapped has sparked concerns about its feasibility, particularly under Ghana’s ongoing IMF-supported programme.
The cancellation of these two tax handles as announced by the incoming National Democratic Congress (NDC) government could create a significant revenue shortfall in Ghana’s budget next year.
This development poses serious threats to fiscal sustainability as the levies are projected to peak in 2025 to stabilize government finances amidst economic pressures.
Government estimates show that E-Levy is expected to generate GHS 2.4 billion in 2025, an increase from GHS 2.1 billion budgeted for this year.
Similarly, the COVID-19 Levy is projected to bring in GHS 3.97 billion next year, up from GHS 3.1 billion in 2024.
Based on these calculations, the two tax streams are anticipated to contribute an additional GHS 1.2 billion in 2025 compared to the 2024 figures.
This GHS 6.4 billion loss could undermine funding for critical sectors of the economy.
The revenue shortfall may compel the government to resort to borrowing thereby exacerbating the country’s already unsustainable debt levels and increasing Ghana’s exposure to economic risks.
Analysts caution that removing these taxes without clear alternative revenue measures could undermine fiscal stability and derail the country’s fragile economic recovery efforts.
Some industry players believe the solution lies in reducing import exemptions. They are estimating potential tax savings of approximately GHS 9 billion in this regard.
“Direct tax exemptions at the ports alone amounted to about GHS 3.5 billion, of which the government approved approximately GHS 1.7 billion. Additionally, some items are zero-rated when imported. If those items are reviewed, we could generate significant revenue. Combined, one can estimate close to GHS 9 billion from port exemptions and zero-rated imports. Therefore, if we reduce these exemptions, the revenue loss from abolishing the two levies can certainly be recovered”, says tax consultant, Francis Timore-Boi.
While the proposed cancellation aligns with the NDC’s goal to alleviate the tax burden on households and businesses, the economic trade-offs need some careful analysis, especially in offsetting this revenue gap at a time when economic recovery efforts are still ongoing.
