Some tax analysts are raising concerns over the ambitious tax proposals put forward by the New Patriotic Party (NPP) and the National Democratic Congress (NDC) in their manifestos, particularly regarding plans to remove the Electronic Transaction Levy (E-Levy) and the COVID-19 Levy.
The analysts caution that these proposals, set to be implemented under an International Monetary Fund (IMF) programme, could have significant financial repercussions for the country.
According to tax consultant Francis Timore Boi, the combined revenue from the COVID-19 Levy and the E-Levy is projected to generate approximately GHC7.7 billion in 2025.
Speaking to Joy Business, Mr. Timore Boi warned that the blanket removal of these taxes without alternative revenue-generating measures could derail the IMF programme, which is focused on improving government revenue and ensuring that expenditure is redirected to critical areas to help alleviate poverty.
“If any policy you seek to introduce may bring down revenue, the IMF may not be happy with that. You are planning to abolish the COVID-19 levy and the E-Levy. COVID-19 levy alone in 2025 is estimated to bring in about GHC5.6 billion. If you take it off, how are you going to replace it? In 2025, we are expecting E-Levy to give us about GHC2.1 billion and in 2026, it is projected to increase to about GHC2.4 billion,” he explained.
Mr. Timore Boi expressed concern that neither of the major political parties has proposed an alternative revenue model to make up for the potential shortfall resulting from the removal of these taxes. He emphasized the importance of having a workable budget that provides a clear plan for addressing the revenue shocks that would occur if these taxes were abolished.
“It is important because the budget has not shown us that you are going to introduce new taxes,” he noted.
While acknowledging that the E-Levy is unpopular and that there is a general sentiment in favor of its removal, Mr. Timore Boi stressed the need for a broader discussion on how to fill the financial gaps that will be created by its abolishment.
Without a solid plan in place, he warned, the proposed tax cuts could run counter to the objectives of the IMF programme and jeopardize the country’s economic stability.