Scrapping E-Levy and COVID-19 Tax Could Result in GHS 6.4bn Revenue Loss for Ghana

The removal of the E-Levy and the COVID-19 tax is projected to cause a revenue loss of GHS 6.4 billion in 2025 alone, raising concerns over the feasibility of this proposal.

President-elect John Dramani Mahama’s ambitious plan to eliminate these taxes has sparked debate, particularly given Ghana’s ongoing IMF-backed economic program.

Scrapping these two tax measures, as promised by the incoming National Democratic Congress (NDC) government, could create a significant shortfall in the country’s budget for the coming year, threatening fiscal stability.

Government projections show that the E-Levy is expected to generate GHS 2.4 billion in 2025, an increase from the GHS 2.1 billion initially budgeted for 2024. Similarly, the COVID-19 levy is anticipated to raise GHS 3.97 billion next year, up from GHS 3.1 billion in 2024.

Together, these taxes are expected to bring in an additional GHS 1.2 billion in 2025 compared to the previous year.

The GHS 6.4 billion shortfall could undermine funding for essential sectors of the economy.

With reduced revenue, the government may have to resort to borrowing, further increasing the country’s already high debt levels and exposing Ghana to greater economic risks.

Experts warn that abolishing these taxes without clear alternative revenue sources could destabilize the country’s finances and hinder its fragile economic recovery.

Some industry stakeholders suggest that cutting import exemptions could provide a solution. They estimate that such measures could save around GHS 9 billion. Tax consultant Francis Timore-Boi explained, “Direct tax exemptions at the ports alone amounted to about GHS 3.5 billion, with the government approving GHS 1.7 billion. If items currently zero-rated on importation are reviewed, significant revenue could be generated. Reducing these exemptions could help offset the revenue loss from scrapping the two taxes.”

While the proposal aligns with the NDC’s goal to ease the tax burden on businesses and households, careful analysis is required to balance the fiscal trade-offs, particularly during a period of economic recovery.