John Dramani Mahama has boldly promised to scrap several taxes within his first 90 days in office. However, experts are urging caution, highlighting significant economic challenges that could arise from such drastic fiscal changes.
Mahama has vowed to abolish what he termed “draconian” taxes, including the E-levy and COVID levy, a 10% levy on betting winnings, and an emissions levy. He claims these measures are essential to easing Ghanaians’ financial strain and improving the business environment. Additionally, he plans to review taxes on vehicles and equipment imported for industrial and agricultural use.
“Within my first 90 days in office, I will scrap the following draconian taxes to alleviate hardships and ease the high cost of doing business: E-levy, COVID levy, 10% levy on bet winnings, and Emissions levy’.
During his 90 days in office, he also promised to review taxes and levies on vehicles and equipment imported into the country for industrial and agricultural purposes.
Despite these assurances, the Ghana Revenue Authority (GRA) has warned against the immediate removal of the e-levy, which has proven to be a substantial revenue source, generating GH₵1.19 billion in 2023—exceeding its target by over GH₵83 million. Similarly, the recently implemented betting tax raised GH¢15 million in just a month of its implementation.
The International Monetary Fund (IMF) has also weighed in, pointing out persistent vulnerabilities in Ghana’s economy. In its latest review of Ghana’s $3 billion Extended Credit Facility, the IMF emphasized the need for enhanced revenue mobilization and prudent monetary policies to ensure fiscal stability
Economist Dr. Evans Nunoo has also expressed concerns regarding the tax cut stating that the country’s current financial standing does not support such drastic changes. “You may recall that we have rescheduled our debts, and there are still several debts we are supposed to pay but have been unable to settle. Although we managed to make some payments, we mostly just rescheduled them. We were fortunate to have some of the debts canceled, but clearly, we have significant debt ahead that requires careful planning and hard work to address as a nation”.
Regarding the suggestion of removing or reducing some taxes, Dr. Nunoo said, “I believe this is not advisable given the nation’s current financial position. While some of the taxes have been sources of complaints and burdens to Ghanaians, removing them without alternative measures in place to augment revenue will only worsen the situation. For instance, if the E-Levy is removed, the government must quickly find a replacement, such as reinstating tollbooths or addressing revenue leakages, to recover the revenue that would otherwise be lost”.
What Happens in the First 100 Days
According to the above economic analysis, if the government proceeds to remove taxes without implementing compensatory revenue measures, it will be forced to cut expenditures drastically. This would mean setting up a very lean government and reviewing existing policies, such as the Free Senior High School program. Policies like these might need to be streamlined so that only those who genuinely need them benefit, while those who can afford to pay are required to do so. This approach would create financial room to address other pressing needs.
Additionally, addressing issues like corruption and ensuring accountability will be crucial. The government must ensure that checks and balances are effectively in place so that the limited funds available are used judiciously. Careful management of monetary policy will also be essential, avoiding reliance on the Bank of Ghana to print money, as this contributed significantly to the economic challenges in 2022.
The government must strike a balance between revenue and expenditure. If taxes are reduced or eliminated, corresponding cuts in expenditure are necessary to maintain fiscal stability.
Final Advice to the Government in the First 100 Days
The government should focus on reducing the size of its administration as much as possible to cut costs as mentioned in the manifesto. It should also revisit and strategically adjust policies like the Free Senior High School program to target those in genuine need while encouraging those who can afford to pay to do so. This will provide financial space to address other national priorities.
Furthermore, the government must take firm steps to tackle corruption. Investigations into previous cases of financial mismanagement should be conducted, ensuring accountability and preventing recurrence. The recruitment processes for state agencies such as the police and military must also be transparent, eliminating any culture of favoritism or bribery.
As Ghana prepares for the leadership transition, it remains to be seen whether the 90-day tax relief plan will spur economic growth or face insurmountable obstacles
