Key points:
- Tax cuts aim to ease household pressure
- VAT overhaul promises fairness, but risks loom
- Mining, road tolls expected to fill revenue gaps
FINANCE Minister Cassiel Ato Forson’s 2025 budget speech in Parliament on Tuesday unveiled bold tax reforms designed to ease economic pressure on households and businesses. But while the measures offer much-needed relief, analysts question whether the government’s revenue projections can hold—especially with IMF commitments hanging in the balance.
Forson declared the budget ‘a blueprint for growth, stability, and opportunity,’ but a closer analysis reveals a delicate balancing act between short-term relief and long-term fiscal sustainability.
Tax cuts: a political promise fulfilled
Forson wasted no time in fulfilling key manifesto promises. The abolition of several taxes—the 10 percent withholding tax on lottery winnings, the 1 percent Electronic Transfer Levy (e-levy), the emission levy, and VAT on motor vehicle insurance—is a headline-grabbing move that will be welcomed by many.
‘The removal of these taxes will ease the burden on households and improve disposable incomes,’ Forson assured Parliament.
This move appears to be driven as much by political necessity as economic strategy. After years of public outcry over the e-levy, the government has responded decisively. Yet, critics warn that removing taxes with minimal compensation measures could create funding gaps.
VAT reform: necessary but complicated
Arguably the most ambitious aspect of Forson’s plan is a full overhaul of Ghana’s VAT system. Forson described the current regime as ‘distorted and inefficient,’ combining VAT and sales tax principles with multiple levies that inflate the effective rate to nearly 22 percent.
The proposed changes include:
- Abolishing the Covid-19 levy
- Re-integrating GETFund and NHIL levies into the main VAT structure
- Raising the VAT registration threshold to exempt micro and small businesses
- Reversing the flat rate VAT regime
- Reducing the overall VAT burden for businesses and consumers
Forson’s announcement of a VAT Reform Taskforce, and upcoming technical support from the IMF in April 2025, signals the complexity of these reforms. ‘We are committed to reversing these distortions and making VAT simpler and fairer for everyone,’ Forson said.
However, analysts argue that while simplification is necessary, VAT reforms are notoriously difficult to implement without significant disruptions. Any delay or policy confusion could impact business confidence.
Road tolls and mining levies: the revenue lifelines?
To plug the gap from scrapped taxes, Forson announced the reintroduction of road tolls and a hike in mining sector levies.
‘We will roll out a technology-driven system to ensure efficiency and transparency in road toll collections,’ Forson noted. Tolls were scrapped in 2022, and their return has raised eyebrows, particularly over implementation speed and potential public resistance.
In the extractives sector, Forson proposed increasing the Growth and Sustainability Levy on mining companies from 1 percent to 3 percent of gross production. ‘We are ensuring Ghana gets its fair share of the windfall from rising global commodity prices,’ he said.
But critics warn that higher levies could dampen investment in the mining sector, historically a pillar of Ghana’s economy.
‘There is a real risk that pushing too hard on the mining sector could backfire if companies scale back operations,’ one industry analyst observed.
Fiscal prudence or overconfidence?
Forson defended the removal of taxes by pointing to savings achieved by reducing the tax refund ceiling from 6 percent to 4 percent, which he claims frees up GH¢3.8bn ($255 million). ‘We have stopped the bleeding,’ he said.
That savings, Forson argued, offsets the GH¢2bn ($134 million) in lost revenue from the e-levy and betting tax removals. Total revenue and grants for 2025 are projected at GH¢223.5bn ($15bn), representing 17.4 percent of GDP. The projected deficit is GH¢43.8bn ($2.9bn), or 3.1 percent of GDP.
Yet, the budget assumes revenue growth will hold steady even as key taxes are scrapped. Some analysts question whether this optimism is justified, particularly given Ghana’s recent IMF bailout conditions.
‘Forson’s projections are ambitious,’ an Accra-based economist said. ‘If tax compliance and revenue mobilisation don’t improve as planned, the government risks falling short on both spending and IMF targets.’
A budget built on trust—but can it deliver?
Forson closed his presentation with an appeal for national unity: ‘Together, we can build a resilient economy that addresses the challenges we face as a country.’
This year’s budget delivers on promises of relief but shifts the burden of success onto future execution. Reintroducing road tolls, reforming VAT, and increasing mining levies are politically risky, but necessary to keep Ghana’s finances afloat.
Whether Forson’s Ghana 2025 tax reforms strike the right balance between growth and prudence will become clear in the months ahead. The key question remains: can the government deliver on its promises without jeopardising economic stability?
