Govt faces revenue challenge amid potential tax cuts

Government is faced with a critical decision regarding tax policies as it considers the removal of the e-levy, betting tax and emission levy. 

While these levies have been described as a burden on businesses and individuals, their removal could result in a significant shortfall in government revenue.

This raises questions about how the state will compensate for the lost income whether by introducing alternative taxes or cutting public expenditures.

Speaking during the Deloitte Ghana 2025 Tax and Regulatory Outlook webinar, Partner of Tax and Regulatory Services at Deloitte Ghana, Gideon Ayi Owoo, highlighted the implications of potential tax cuts on government revenue and the economy.

“If the government abolishes the e-levy, betting tax and emission levy, it will result in a significant decline in tax revenue. The previous administration introduced the betting tax to generate additional revenue from the gaming activities popular among the youth. However, the current ruling party considers these taxes a nuisance. 

Nonetheless, businesses should anticipate the introduction of alternative taxes by the government,” he said.

Import taxes 

Beyond direct taxes, import duties and levies play a crucial role in government revenue. 

However, high import duties have also contributed to inflation, making goods more expensive for consumers. 

Policymakers and stakeholders have in recent times debated whether reducing these import taxes could help drive industrialisation and boost local agribusiness.

“Import taxes directly affect imported goods and contribute to inflation. 

A government's pledge to lower import duties and taxes can support industrialisation and agribusiness, benefiting the country. However, to make this feasible, the government must find alternative revenue sources or cut expenditures,” he said.

The trade and industrial sectors have long advocated lower import duties, arguing that such a move would encourage more investment in local production. 

However, he noted that balancing that with the government’s need for revenue remained a challenge.

Policy changes

With potential changes in the tax regime, businesses must prepare for possible shifts in fiscal policy. 

Experts predict that if the government eliminates certain taxes, it may introduce new ones to compensate for the revenue shortfall. 

These could come in the form of broader consumption taxes, corporate levies or adjustments to existing tax brackets.

However, the Minister of Finance, Dr Cassiel Ato Forson, has rejected claims that the government needs to adjust tax rates to generate revenue for the country's rebuilding efforts.

While addressing questions before the Parliamentary Appointments Committee during his vetting, Dr Forson outlined his strategy to boost revenue without increasing taxes.

He emphasised the importance of improving tax compliance as a key measure.

"We don't necessarily need to increase taxes to raise revenue. We have the tools at our disposal, and I will work closely with the Ghana Revenue Authority (GRA) to ensure we collect the necessary revenue by enhancing compliance,” he said. 

Insights

The discussion at the Deloitte Ghana webinar provided insights into the regulatory landscape that businesses and investors should expect in 2025. 

Tax policies remain a critical component of economic management, and how the government navigates these changes will determine the fiscal health of the country in the coming years.

While the ruling administration considers the e-levy, betting tax and emission levy as a nuisance, the economic reality suggests that eliminating them without a solid revenue replacement plan could create financial strain. 

As businesses and individuals await further clarity on tax policies, many are bracing for possible adjustments in other areas of taxation.