CPS: Scrapped Levies to Cost GH¢18.15bn Revenue Loss

A new study by the Centre for Policy Scrutiny (CPS) projects that abolishing the E-Levy and COVID-19 Health Recovery Levy will cost Ghana GH¢18.15 billion in revenue by 2027.

Fiscal specialist Isaac Danso Agyiri noted that though the abolishment of the two and some other levies offers relief to households and boosts equity, the significant shortfall requires urgent, redesigned revenue measures to avoid increased borrowing.

The study indicated that while the absence of the E-Levy would lead to a tax loss of GH¢8.2 billion, the absence of the COVID-19 Health Recovery Levy will lead to a short fall of GH¢9.95 billion.

Mr. Isaac Danso Agyiri, has therefore called on the government to reconsider some recently abolished taxes as a way to address a widening revenue shortfall and maintain fiscal stability.

While acknowledging that the removal of taxes such as the E-Levy, COVID-19 Levy, and Betting Tax has provided relief to households and businesses, he warned that the decision has significantly reduced government income at a time when expenditure demands remain high.

According to Mr. Agyiri, policymakers are now faced with the difficult task of balancing economic relief with the need to generate sustainable domestic revenue.

He explained that the scale of the financial gap created by scrapping these taxes cannot be ignored, and therefore, a careful reassessment may be necessary. However, he emphasized that any move to reintroduce the taxes should not simply replicate their previous structure.

He noted that the earlier versions of these taxes faced strong public resistance, largely due to concerns about fairness, transparency, and the disproportionate burden placed on low-income earners. Because of these issues, he cautioned that reinstating the taxes in their original form would likely trigger similar opposition and undermine compliance efforts.

Instead, Mr. Agyiri advocated for a redesigned approach that addresses past shortcomings. He stressed the importance of creating tax policies that are simple, fair, and clearly understood by the public. In his view, improving the design of these taxes is essential to increasing acceptance and ensuring that citizens are more willing to comply.

He further highlighted the country’s rapidly growing digital economy as a promising avenue for revenue generation. With the increasing use of mobile money and electronic transactions, he believes there is an opportunity for the government to develop a more efficient and broadly acceptable tax framework within the digital space. Such a system, he suggested, could help capture revenue more effectively without overburdening vulnerable groups.

Mr. Agyiri proposed that a restructured digital tax should be carefully designed to protect low-value transactions, thereby shielding low-income users, while ensuring that higher-value transactions contribute fairly to the tax base. This targeted approach, he argued, would strike a better balance between equity and revenue mobilisation.

In addition to policy design, he underscored the importance of public engagement and education in the success of any tax initiative. He observed that one of the key reasons for the widespread opposition to the scrapped taxes was inadequate communication about their purpose and how the funds would be used. Without clear and consistent messaging, public trust in tax policies can quickly erode.

To address this, he urged the government to prioritize transparency and accountability. Clearly explaining how tax revenues are utilized, and demonstrating tangible benefits to citizens, would go a long way in building trust and improving acceptance. In his view, public confidence is a critical component of any successful tax system.

Mr. Agyiri also called for the adoption of modern technology to strengthen tax administration. By leveraging digital tools, the government can reduce inefficiencies, minimize leakages, and enhance overall transparency within the system. Improved administration, he noted, would not only increase revenue collection but also reinforce public confidence in the process.

While he acknowledged the immediate relief that tax cuts have provided, Mr. Agyiri warned of the broader economic risks associated with failing to address the resulting revenue gap. If the shortfall persists, the government may be forced to either increase borrowing or reduce spending, both of which carry significant economic consequences.

In conclusion, he stressed the need for a balanced strategy that combines targeted tax relief with effective and well-designed revenue measures. Such an approach, he argued, is essential for maintaining fiscal stability and supporting the country’s long-term economic development.