Ghana Scraps IMF-Linked Taxes in 2025 Budget to Ease Economic Burden

Ghana’s government has announced the removal of several controversial taxes introduced during the COVID-19 era, aiming to relieve financial pressure on citizens and businesses. While presenting the 2025 budget, Finance Minister Cassiel Ato Forson emphasized that these tax cuts would improve household incomes and support economic recovery.

“The removal of these taxes will ease the burden on households and improve their disposable incomes. In addition, it will support business growth,” Forson stated.

Among the scrapped levies are the 1% tax on mobile money transfers, VAT on motor vehicle insurance, a 10% tax on lottery winnings, an emission levy on industries and vehicles, and a 1.5% tax on unprocessed gold from small-scale miners. These taxes were initially imposed as part of Ghana’s bid to secure a $3 billion IMF bailout in 2023, but the new administration under President John Mahama argues they have placed unnecessary hardship on Ghanaians.

A Shift in Economic Policy

Despite the immediate relief these tax cuts offer, concerns have emerged over how the government intends to recover the lost revenue. Forson acknowledged the economic challenges but assured that alternative measures are being put in place to enhance tax collection without increasing the fiscal deficit.

“We inherited an economy in deep crisis, hard hit with debt and beset by other fiscal challenges such as large accumulation of arrears, energy sector financing shortfalls, and large fiscal risks from the cocoa and financial sectors,” he explained.

To compensate for the revenue shortfall, the government plans to amend the Revenue Administration Act, a move projected to increase tax compliance and generate an additional 0.3% of GDP. In addition, it intends to enhance road toll collection under its infrastructure development initiative, dubbed the “Big Push”.

Gold Sector Reform & Economic Recovery

Recognizing the critical role of Ghana’s gold industry, the government is also introducing reforms to improve revenue collection from the sector. A key initiative is the establishment of the Ghana Gold Board, which will regulate the industry and help stabilize the local currency by increasing foreign exchange reserves.

Illegal mining, known locally as galamsey, has contributed to both revenue losses and environmental degradation. The new board is expected to formalize gold exports and ensure the country benefits from its vast mineral wealth.

Economist Daniel Amateye Anim-Prempeh commended the tax cuts but stressed that the government must strengthen revenue collection efforts to maintain fiscal stability.

“The removal of these nuisance taxes will put money back into the pockets of citizens and help businesses recover. However, the success of these measures will depend on the government’s ability to boost revenue collection without increasing the fiscal deficit,” he noted.

Ghana’s economy remains under pressure due to debt mismanagement, fiscal deficits, and currency depreciation. However, economists believe these tax cuts will provide relief to citizens and businesses.