Ghana Abolishes IMF-Linked Taxes to Alleviate Economic Hardship

Ghana’s government has eliminated several Covid-era taxes to alleviate economic strain on citizens. These include levies on mobile money transfers and vehicle insurance. Finance Minister Cassiel Ato Forson emphasized that the measures aim to support households and businesses while improving tax revenue collection. The government is also working on initiatives to stabilize the economy amidst ongoing fiscal challenges.

On Tuesday, Ghana’s government announced the cancellation of several taxes established during the Covid pandemic to secure financing from the International Monetary Fund (IMF). Finance Minister Cassiel Ato Forson referred to these five taxes as “nuisance levies,” including a 1% levy on mobile money transfers and a value-added tax on motor vehicle insurance, which will no longer be enforced as part of the government’s 2025 budget presentation.

The decision to eliminate these taxes comes amid significant economic hardship for citizens, exacerbated by issues such as debt mismanagement and financing shortfalls. The government aims to alleviate the financial strain caused by soaring inflation and a weakening currency. Forson promised that alternative measures would be implemented to ensure adequate tax revenue collection as they address the revenue shortfall created by these tax cancellations.

Forson highlighted that the removal of the taxes will relieve financial pressure on households and enhance their disposable income, while simultaneously fostering business growth. Other cancelled taxes included a 10% levy on lottery winnings, an emissions levy on industries and vehicles, and a 1.5% tax on unprocessed gold from small-scale miners, which were all introduced by the preceding administration to secure a $3 billion IMF bailout.

Under the leadership of President John Mahama, who was elected in December, the new government has initiated measures to “stop the bleeding” of the economy. There are plans to amend the Revenue Administration Act to enhance tax revenue, which is anticipated to contribute an additional 0.3% to the gross domestic product (GDP). Additionally, the government intends to improve road toll collection in conjunction with its ongoing infrastructure development initiative, known as the “Big Push.”

The tax cuts arrive as Ghana continues to grapple with the economic crisis that prompted its request for IMF assistance. Forson acknowledged the challenging fiscal landscape, citing burdens such as debt accumulation and financing deficits in various sectors, including energy and cocoa. Economist Daniel Amateye Anim-Prempeh endorsed the government’s actions, asserting that the removal of these nuisance taxes will stimulate financial liquidity for citizens and business recovery. Still, he noted that the effectiveness of these tax cuts hinges on the government’s ability to increase revenue without raising the fiscal deficit.

To further stabilize the economy, the government is establishing the Ghana Gold Board to oversee the gold sector, aiming to boost foreign exchange reserves and stabilize the local currency while combating illegal mining, known locally as galamsey, which has surged due to rising gold prices and has caused significant environmental damage.

The Ghanaian government’s recent decision to revoke several Covid-era taxes is aimed at providing financial relief to citizens amid economic challenges. By focusing on enhancing tax collection through alternative measures, the administration seeks to improve overall fiscal health while stimulating household finances and business growth. As they navigate ongoing economic difficulties, the government’s effectiveness will depend on sustainable revenue generation without exacerbating fiscal deficits. Furthermore, initiatives like the establishment of the Ghana Gold Board will play a critical role in stabilizing the economy and addressing illegal mining activities.

Original Source: www.sanfordherald.com