Professor Isaac Boadi, Executive Director of the Institute for Economic Research and Public Policy (IERPP) and Dean of the Faculty of Accounting and Finance, has raised red flags over the government’s proposed tax reforms for 2025.
- Proposed tax reforms for 2025 could cost Ghana between GH¢5.5 billion and GH¢7.1 billion in lost revenue
- Abolishing the 1% Electronic Transfer Levy (E-Levy) could rejuvenate Ghana’s digital finance ecosystem but presents a revenue challenge
- Scrapped 10% withholding tax on lottery winnings provides relief to the gaming industry but raises concerns over gambling addiction
According to recent projections, these reforms—intended to ease financial pressure on citizens and businesses—could cost the nation between GH¢5.5 billion and GH¢7.1 billion in lost revenue.
While acknowledging the potential short-term benefits, such as reduced taxes on essential goods and services for low-income households, Professor Boadi cautioned that the government must swiftly introduce alternative fiscal strategies to offset the impending losses.
“If the government fails to implement compensatory revenue measures, it risks compromising public finances and weakening long-term economic resilience,” he stated.
The IERPP further warned that without new revenue sources, Ghana may be exchanging temporary relief for future fiscal instability.
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E-Levy abolishment to revive digital payments
As outlined in paragraph 258 (ii) of the 2025 budget statement, the government has abolished the 1% Electronic Transfer Levy (E-Levy). This move is expected to rejuvenate Ghana’s digital finance ecosystem. Mobile money usage, which declined by 30% following the levy’s introduction in 2022, is projected to rebound by 25–40%, improving financial access for the estimated 58% of Ghanaians without access to formal banking services.
“We will abolish the Electronic Transfer Levy (E-Levy) of 1%,” the Minister stated.
However, the repeal also presents a revenue challenge. The E-Levy raised GH¢1.46 billion in 2023, significantly below the target of GH¢4.7 billion. Its removal means an estimated GH¢517.7 million shortfall in the 2025 budget, adding pressure to a projected 8.5% fiscal deficit.
Betting tax removed
In paragraph 258 (i), the government also announced the scrapping of the 10% withholding tax on lottery winnings, known colloquially as the “Betting Tax.”
“We will abolish the 10% withholding tax (WHT) on winnings from lottery,” the Minister declared.
This decision brings relief to the gaming industry, which experienced a 15% revenue dip from 2023 to 2024. Companies such as LottoHub, which retrenched 500 workers due to the tax, may now recover. However, critics have raised concerns over gambling addiction, which affects an estimated 4% of the adult population. The repeal, made without complementary investment in public health safeguards, could exacerbate this issue. The gaming sector contributed GH¢78 million in taxes in 2023, with the repeal representing a relatively modest loss of 0.042–0.053% of overall tax income.
Emission Levy scrapped
Paragraph 258 (iii) outlines the government’s decision to eliminate the GH¢100 annual Emission Levy on vehicles and industrial operations.
“We will abolish the Emission Levy on industries and vehicles,” the Minister stated.
This measure is expected to reduce operational costs for major manufacturers like Ghacem, which reportedly paid GH¢12 million annually in emission levies. Analysts suggest this could lead to a 2–3% reduction in cement prices, potentially stimulating infrastructure development.
Nevertheless, environmental advocates warn that the move contradicts Ghana’s climate commitments made at COP28. Carbon emissions in the country increased by 5% in 2023, and the removal of the levy—originally projected to generate GH¢450 million annually—may further weaken environmental incentives.
VAT on Vehicle Insurance premiums dropped
In a bid to lower vehicle operating costs, the government announced in paragraph 258 (iv) that it would abolish VAT on motor vehicle insurance policies.
“We will abolish the VAT on motor vehicle insurance policy,” the Minister noted.
The move is anticipated to reduce insurance premiums by up to 20%—for example, from GH¢1,150 to GH¢1,000 on standard policies. However, with VAT collections projected at GH¢140.98 billion in 2024, this reform could result in a revenue shortfall ranging between GH¢1.4 billion and GH¢2.8 billion, further widening the fiscal gap.
Tax on unprocessed gold repealed to fight smuggling
As part of efforts to formalise the small-scale mining sector, the government has also decided to scrap the 1.5% withholding tax on the sale of unprocessed gold.
“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).
The initiative, under the Ghana Gold Board (GOLDBOD), is intended to encourage legal sales and reduce smuggling. Pilot regions have already seen a 40% rise in compliance following initial tax relief discussions. However, an estimated 30% of gold production still exits the country through informal routes. With 2024 gold revenue hitting GH¢19.8 billion, the repeal results in a GH¢297 million annual revenue loss.
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Balancing relief with responsibility
Professor Boadi reiterated that while these tax reforms may offer citizens and businesses some relief, their long-term fiscal implications cannot be ignored.
“These measures are politically popular but economically precarious if not matched with responsible fiscal planning,” he warned.
As the government presses forward with its 2025 economic agenda, the call for a careful balancing act between social welfare and sustainable public finance has never been louder.
