Ministry of Finance Explains Policy Justification for Proposed Tax Measures in Ghana's 2025 Budget

During a recent webinar hosted by the UK-Ghana Chamber of Commerce (UKGCC) and PwC Ghana, Daniel Nuer, the Acting Director of the Ministry of Finance’s Revenue Policy Division, elaborated on the rationale behind the proposed tax measures in Ghana’s 2025 National Budget. According to Nuer, the proposed tax adjustments are based on a mix of economic, administrative, and political economy considerations, which aim to streamline the tax system while addressing broader fiscal challenges.

The government’s direct tax proposals include a notable increase in the tax-free income threshold for resident individuals, raising it from GH¢490 to approximately GH¢540. Additionally, the government intends to extend the Growth & Sustainability Levy (GSL) through to 2028 for all eligible entities. For gold mining companies, the government proposes to increase the GSL rate from 1% to 3% of their gross production. Moreover, there are plans to remove the 1.5% withholding tax on unprocessed gold purchases from small-scale miners and to abolish the 10% tax on lottery winnings, which applies to betting, gaming, and other games of chance.

The increase in the tax-free chargeable income threshold is primarily driven by administrative reasons, as Nuer explained. He pointed out that the tax calculations had previously faced some inconsistencies, particularly when adding the upper tax rate. The proposed change aims to enhance the efficiency and accuracy of tax assessments, ensuring that no discrepancies arise like those experienced in the previous year.

One of the more significant changes is the removal of the 1.5% withholding tax on unprocessed gold purchases. Nuer explained that this adjustment is intended to streamline the process of purchasing gold, ensuring that all transactions are conducted through the Gold Board, similar to the system in place for the Ghana Cocoa Board. By doing so, the government expects to increase transparency, curb illegal gold exports, and generate more foreign exchange for the country. Additionally, Nuer suggested that this move could open up access to international markets, such as the London market, which is currently inaccessible to many small-scale miners due to a lack of a formalized process. Overall, this policy aims to boost revenue while stabilizing the cedi and creating a more structured market for gold.

Although the removal of the 1.5% withholding tax on unprocessed gold purchases has economic motivations, the abolition of the 10% tax on lottery winnings might appear politically motivated at first glance. However, Nuer clarified that the decision was primarily driven by administrative challenges. He explained that while sports betting taxes were easier to collect due to automation, the collection of taxes on other forms of gambling was proving difficult to enforce. As a result, the government decided to eliminate the 10% tax for now, until a better and fairer way to administer it could be developed.

Despite these adjustments, Mary Darko, Associate Director at PwC Ghana, raised concerns about the government missing an opportunity to broaden the tax base. She noted that the repeal of the 1.5% withholding tax on gold and the elimination of the 10% tax on lottery winnings could lead to some individuals and businesses slipping through the tax net. In particular, those who are unregistered may now be exempt from tax, which could complicate the government’s efforts to ensure tax compliance. Darko emphasized that for these reforms to be effective, the government would need to invest in monitoring and ensuring that the affected groups are still fulfilling their tax obligations.

Darko also highlighted the positive impact of the increase in the tax-free income threshold for employees, which she believed would provide some financial relief. However, she pointed out that the repeal of the 1.5% withholding tax would not provide relief for small-scale miners, as it was only an advance tax and their overall compliance obligations remain unchanged.

When discussing the Growth & Sustainability Levy, Nuer explained that the extension of this levy to 2028 and the increase in rates for eligible entities was necessary to continue raising revenue to address Ghana’s ongoing fiscal challenges. While businesses will undoubtedly feel the impact of the levy, Darko advised companies to remain compliant and anticipate that the levy may continue beyond its sunset clause in 2028.

The webinar also delved into proposed indirect tax measures, such as the removal of VAT on motor vehicle insurance premiums, exemptions for certain pharmaceutical raw materials and essential medicines, the possible elimination of the 1% Electronic Transfer Levy (E-Levy), and the abolishment of the Emissions Levy.

Moderated by Abeku Gyan-Quansah, Tax Partner at PwC Ghana, the webinar offered valuable insights into the government’s 2025 tax proposals and their potential impact on businesses and the broader economy. The discussion highlighted the complexities involved in tax policy decisions and the need for a balanced approach to reform, ensuring that the tax system remains efficient, fair, and effective in generating revenue for national development.