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After an anxious wait for the 2025 Budget Statement, the Minister of Finance, Dr Cassiel Ato Forson, yesterday delivered a 70-page speech to Parliament to set in motion some bold tax reforms meant to actualise key promises that underpinned the successful 2024 election campaign of the National Democratic Congress (NDC).
Dr Forson explained that the tax reforms were designed to alleviate hardships on the citizenry, ease the high cost of doing business, and create jobs for the teeming Ghanaian youth across the country.
Laying the Budget Statement on the theme: “Resetting the economy for the Ghana we want” before Parliament on behalf of President John Dramani Mahama, the Finance Minister said the government would abolish the 10 per cent withholding tax on winnings from lottery, otherwise known as the “betting tax”; the one per cent Electronic Transfer Levy, commonly called E Levy; the Emission Levy on industries and vehicles; the Value Added Tax (VAT) on motor vehicle insurance policy, and the 1.5 per cent withholding tax on unprocessed gold by small-scale miners.
The minister explained that the removal of these taxes would ease the burden on households and improve their disposable incomes. Furthermore, he said, it would support business growth and improve tax compliance.
“Mr Speaker, the tax refund account has been abused in recent years. A study on the use of the tax refunds in the last eight years revealed that GH¢29.11 billion had accrued to the tax refund account with only GH¢12.5 billion, representing 43 per cent of the total accrued amount, used for tax refund purposes.
“The study also revealed that GH¢16.6 billion, representing 57 per cent of the total amount accumulated in the tax refund account, was misapplied, which is a total violation of the Revenue Administration Act, 2016 (Act 915) and the Public Financial Management Act, 2016 (Act 921),” he said in the 100-minute presentation.
Dr Forson stated that instructively, there were virtually no tax refund arrears over the period.
Therefore, he said, the government was reducing the current tax refund ceiling by two percentage points from six per cent to four per cent of total revenue as defined in section 69 of the Revenue Administration Act, 2016 (Act 915).
He explained that by reducing the ceiling on the tax refund from six per cent to four per cent, the state would save GH¢3.8 billion.
He said this amount was enough to close the revenue shortfall from the removal of the E-Levy amounting to GH¢1.9 billion and the betting tax of GH¢180 million.
Already, he added, the government had saved GH¢3.8 billion for 2025 alone from only one source, and that this was enough to close the gap from the taxes that had been removed.
Dr Forson said the government had sealed holes to stop the financial bleeding in response to the concerns of well-meaning Ghanaians on how the revenue shortfall as a result of the removal of selected taxes would be addressed.
“Accompanied with this budget, we will amend the Revenue Administration Act, 2016 (Act 915). This measure will improve the tax revenue, net of tax refunds, by two per cent, representing 0.3 per cent of GDP (gross domestic product).
“In line with the government policy, the 2025 minimum wage recently negotiated with the National Tripartite Committee will be zero-rated,” he said.
The minister said the government would also review the Energy Sector Levies Act (ESLA) — without increasing the levy — to consolidate the Energy Debt Recovery Levy, Energy Sector Recovery Levy (Delta Fund), and Sanitation and Pollution Levy into one levy and use the proceeds to cater for the energy sector shortfalls and service the inherited debt service obligation.
He said the rest of the energy sector levies, including Road Fund Levy, Energy Fund Levy, Price Stabilisation and Recovery Levy, Public Lighting Levy and National Electrification Levy would remain to support the achievement of their intended objectives.
He said Ghana had not sufficiently capitalised on the benefits of its extractive sector to generate revenue to support development and diversification.
“We have failed to leverage our natural wealth by capturing its rent and channelling it towards productive infrastructure and human capital.
Natural resource rent, which is the difference between the revenue of a commodity and the average cost of producing it, is about 14 per cent of GDP for Ghana.
“However, revenue from the extractive industry is around 1.5 per cent of GDP only.
This is because we fail to fully capture the economic rent of our natural resources,” the minister added.
He said the government was proposing to increase the growth and sustainability levy from one per cent on the gross production of mining companies to three per cent to enable the nation to have its fair share of the windfall from the increase in gold prices.
“We also propose to extend the sunset clause to 2028. We will also propose to extend the sunset clause of the Special Import Levy to 2028,” he said.
Dr Forson, who is also the Member of Parliament for the Ajumako-Enyan-Esiam Constituency, said demand for construction and improvement of road infrastructure continued to increase even as substantial arrears and claims in the road sector remained.
“While the annual average collections from road tolls have not been significant compared to its potential, the existing zero-rate policy for road tolls has exacerbated the situation and dimmed any prospects of raising enough revenue from tolls for road construction and maintenance,” he said.
Accordingly, he added, the government would work with stakeholders, including the private sector, to roll out a technology-driven solution to reintroduce road tolls in 2025 as part of the Big Push Programme.
Going forward, the minister said, the government would also strengthen the legal and regulatory regime for non-tax revenues and enforce the framework for improved service delivery.
That, he said, would be achieved through the introduction of an overarching non-tax revenues legislation, amendment of existing relevant laws and the development of a national non-tax revenues strategic policy or framework.
He said as part of the reform efforts to improve other non-tax revenues’ revenue streams, the government would explore and operationalise a regulatory framework for the collection, management and reporting of property rates consistent with the Medium-Term Revenue Strategy (2024-2027) and the Local Government Act.
He said the current compliance rate for small and medium-sized enterprises and personal income tax was below 30 per cent, describing it as extremely low.
“The government will embark on an aggressive and sustained tax education campaign in the next two to three years to ensure improved compliance and tax revenue mobilisation.
“We will also institute quarterly dialogue on tax issues among Ghana Revenue Authority, Ministry of Finance and the business community to ensure that issues affecting businesses are addressed promptly,” the minister said.
