The Institute of Economic Affairs (IEA) has expressed its support for the decision made by Finance Minister, Dr. Cassiel Ato Forson, to eliminate certain outdated and burdensome taxes as promised by the government. The IEA endorsed the government’s move to abolish nuisance taxes such as the Electronic Transactions Levy, Emissions Tax, and Covid Tax.
However, the IEA noted in its analysis of the 2025 Budget and Economic Policy that it had recommended a reduction in the Betting Tax rate from 10% to 5% for both revenue generation and deterrence purposes. Despite this suggestion, the Minister opted to completely eliminate the Betting Tax.
Furthermore, the IEA had proposed the abolition of the Growth and Sustainability Tax (GST), formerly known as the Fiscal Stability Tax, due to its obsolescence. Nevertheless, the Minister decided to retain the tax but increased the rate for extractives companies from 1% to 3%.
The IEA argued that the 3% GST rate is insufficient, advocating for Ghana to seek higher revenue from the extractives sector through measures such as a Super-Profit or Windfall Tax. The Institute emphasized the need for Ghana to maximize its benefits from extractives by revising existing laws to secure more favorable fiscal terms.
Additionally, the IEA expressed concerns regarding Ghana’s projected revenue-to-GDP ratio of 16.1%, only slightly higher than the 2024 ratio of 15.9%. The Institute believes that this ratio is not ambitious enough and falls below the average of 25-30% for peer middle-income countries. The IEA suggested that closing tax loopholes and implementing other measures could significantly boost Ghana’s revenue-to-GDP ratio.
In conclusion, the IEA’s analysis highlights the importance of optimizing revenue generation from the extractives sector and implementing effective fiscal policies to enhance Ghana’s economic prospects. The Institute’s insights serve as valuable guidance for policymakers in navigating the country’s fiscal landscape and promoting sustainable economic growth.
