Economist and Political Risk Analyst, Dr. Theo Acheampong, has identified the E-levy and the COVID-19 Health Levy as two consumer taxes that continue to provoke widespread dissatisfaction among Ghanaians.
He noted that both the NDC and the NPP have made commitments to review or address these levies, along with other tax measures affecting the public.
According to Dr. Acheampong, these taxes have become a major source of concern for many citizens due to their direct impact on everyday financial transactions and the cost of living.
“Together, the two raised GHS3.259 billion or USD 296 million in 2023, accounting for just 2.4% of total domestic revenue or 0.4% of Ghana’s 2023 GDP. Let’s round this figure to 3% of total domestic revenue for argument’s sake.
“To put things into context, this is about as much as the IMF normally gives us for completing a successful review of the current ongoing program (2023-2026)”.
Dr. Theo Acheampong
He further disclosed that in 2023, the E-Transaction Levy generated GHS 1.151 billion in revenue, while the COVID-19 Health Levy yielded GHS 2.108 billion.
Dr. Acheampong highlighted the substantial contribution of these levies to government revenue but emphasized that their unpopularity among the public has made them a focal point for political debate and campaign promises.
The significant revenue collected, he suggested, underscores the government’s reliance on these taxes, even as citizens continue to demand relief from their financial burden.
According to the economist, these two taxes could be easily abolished with minimal impact on public finances due to their relatively modest contribution to overall government revenue.
He explained that scrapping the E-levy and the COVID-19 Health Levy would offer significant financial relief to both individuals and businesses, especially those already grappling with the rising cost of living and economic hardship.
Eliminating these taxes, Acheampong argued, could stimulate economic activity, increase disposable income, and boost consumer confidence, which may, in turn, have positive ripple effects on the broader economy.
Questionable Tax Exemptions Highlighted
Furthermore, Dr. Theo Acheampong expressed concern over the absence of meaningful tax exemptions for Ghanaian businesses.
He stressed that any exemptions granted should be strategically targeted to support specific industrial policy objectives.
However, Acheampong noted that Ghana’s approach over the past 15 years appears to have deviated from this principle, with exemptions often lacking clear purpose or alignment with industrial development goals.
“Luckily, capital DOES NOT de-facto change location due to tax exemptions alone — other factors like the cost of electricity, labor markets, and regulatory environment [control of corruption, political stability, regulatory quality, rule of law, and government effectiveness] play a far bigger role and thus mediate the tax effects”.
Dr. Theo Acheampong
He further noted that empirical evidence from emerging and developing economies suggests that the cost-effectiveness of tax incentives, such as exemptions, in stimulating investment and generating broader economic benefits is mixed and inconclusive.
Acheampong noted that while these incentives are often introduced to attract investment and foster economic growth, studies have shown that their actual impact can vary significantly.
He asserted that in many cases, the desired catalytic effects may not materialize as expected, and the long-term benefits may not justify the fiscal costs associated with providing these incentives. “It is neither here nor there”.
Acheampong highlighted that for certain essential infrastructure investments, it is necessary to offer exemptions, such as import duties, import VAT, NHIL, and others, to support critical development projects.
However, he expressed confusion over instances like the reported $30 million exemption granted by the government for a hotel within the airport enclave
He also questioned the rationale behind such decisions, especially when the long-term benefits remain unclear and the fiscal costs are high.
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