Removing the E-Levy and COVID-19 tax is projected to result in a total GHS 22.15 billion revenue loss between 2025 to 2027.
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 from 2025 to stabilize government finances amidst economic pressures.
A tax analysis report by Francis Timore-Boi show significant revenue losses if the E-Levy and COVID-19 Levy are abolished.
The E-Levy is projected to generate GHS 2.4 billion in 2025, up from GHS 2.1 billion budgeted for 2024, while the COVID-19 Levy is expected to contribute GHS 3.97 billion, an increase from GHS 3.1 billion this year.
Combined, both levies would bring in GHS 6.37 billion in 2025.
The analysis further projects that abolishing these levies will result in a revenue shortfall of GHS 7.37 billion in 2026—GHS 2.74 billion from the E-Levy and GHS 4.63 billion from the COVID-19 Levy.
By 2027, the revenue losses are expected to reach GHS 8.41 billion, comprising GHS 3.09 billion from the E-Levy and GHS 5.32 billion from the COVID-19 Levy.
Over the three-year period, the cumulative revenue loss of GHS 22.15 billion could severely impact funding for critical sectors of the economy.
Analysts warn that such a shortfall could exacerbate fiscal pressures and undermine the government’s ability to meet essential development and operational needs.
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.
