Ghana 2026 Budget: Economist Warns Government Relies Heavily on Tax Compliance After Scrapping E-Levy and COVID-19 Levy

Introduction

The Ghana 2026 budget has sparked significant debate among economists, particularly regarding the government’s bold decision to abolish key revenue-generating taxes. Dr. Adu Owusu Sarkodie, a prominent economist, warns that the fiscal plan hinges entirely on improved tax compliance in Ghana. By scrapping taxes like the e-levy, betting tax, and COVID-19 levy—which collectively brought in billions of cedis—the government aims to broaden the tax base through lower rates and higher voluntary compliance. This approach raises questions about potential revenue shortfalls in the Ghana 2026 budget and the feasibility of relying on taxpayer behavior for economic stability.

In this comprehensive guide, we break down the economist’s analysis, key changes, and implications for Ghana’s economy. Whether you’re a taxpayer, business owner, or policy enthusiast, understanding these shifts in Ghana tax reforms 2026 is crucial for navigating the new fiscal landscape.

Analysis

Dr. Adu Owusu Sarkodie provided a detailed critique during his appearance on Joy News’ PM Express Business Edition. He emphasized that the Ghana 2026 budget eliminates several primary revenue streams that previously bolstered public finances.

E-Levy Abolition and Its Revenue Impact

The e-levy, a 1.5% tax on electronic transactions introduced in 2022, was a cornerstone of digital economy taxation in Ghana. According to Dr. Sarkodie, it generated approximately GH¢2 billion annually. Its abolition creates an immediate revenue gap, as this levy targeted a growing segment of mobile money and digital payments, which have surged in Ghana post-COVID-19.

Betting Tax Scrapped

Similarly, the betting tax, which yielded around GH¢300 million, has been removed. This tax applied to gambling activities, a sector that expanded rapidly with online platforms. Losing this stream further strains the budget, especially as entertainment and gaming contribute to informal economic activity.

COVID-19 Levy: From Crisis Tax to Permanent Fixture

Perhaps most notably, the COVID-19 levy—initially a temporary measure—had evolved into a major revenue source. Projected to contribute GH¢3 billion in the upcoming year, it matched oil and gas royalties estimated at GH¢2.9 billion for the current year. Dr. Sarkodie noted that in the previous year, the levy delivered GH¢2.8 billion, nearly equaling total hydrocarbon royalties. Its scrapping signals a shift away from pandemic-era levies toward sustainable taxation.

The economist calculates a combined loss of about GH¢5 billion from these abolitions alone (e-levy GH¢2B + COVID-19 levy GH¢3B), underscoring a significant Ghana budget revenue shortfall.

Summary

In summary, the Ghana 2026 budget strategy pivots on enhancing tax compliance to offset the loss of high-yield taxes. Dr. Sarkodie explains the government’s rationale: reducing tax rates to expand the payer base, encouraging more Ghanaians to participate in the formal tax system. This Laffer Curve-inspired approach assumes that lower rates lead to higher overall collections through voluntary compliance, but it carries inherent risks if compliance does not materialize.

Key Points

Practical Advice

For individuals and businesses in Ghana, the 2026 budget changes offer opportunities to adapt to a compliance-focused tax regime. Here’s pedagogical guidance on thriving under these reforms:

Improving Personal Tax Compliance

Register with the Ghana Revenue Authority (GRA) via the online portal if not already done. File annual income tax returns accurately, leveraging tools like the Taxpayers’ Portal for seamless submissions. With e-levy gone, focus on declaring mobile money transactions in your income assessments to avoid audits.

Business Strategies for Tax Optimization

Small and medium enterprises (SMEs) should invest in accounting software compliant with GRA standards. Explore VAT incentives for digital services now that betting tax is scrapped—register for VAT if turnover exceeds GH¢200,000 annually. Train staff on record-keeping to boost compliance rates, potentially qualifying for future tax amnesties.

Digital Tools for Compliance

Use GRA’s Integrated Tax Administration System (ITAS) for real-time filing. Apps like those from local fintechs can track deductible expenses, ensuring accurate reporting amid the push for broader tax participation.

Points of Caution

Dr. Sarkodie’s analysis highlights critical risks in the Ghana 2026 budget:

• Revenue Uncertainty: Without guaranteed compliance gains, the GH¢5 billion gap could widen deficits, pressuring borrowing and inflation.
• Over-Reliance on Behavior Change: Historical tax evasion rates in Ghana (around 60-70% informal economy) make the “wider base, lower rate” model precarious.
• Economic Vulnerabilities: Oil royalties remain volatile due to global prices; replacing COVID-19 levy income requires diversified sources.
• Implementation Challenges: GRA must enhance enforcement, education, and technology to drive compliance—delays could exacerbate shortfalls.

Taxpayers should monitor GRA updates, as non-compliance penalties (fines up to 200% of tax due) persist under the Revenue Administration Act, 2016 (Act 915).

Comparison

To contextualize the impacts, compare the scrapped taxes to other revenue pillars in Ghana’s budget:

COVID-19 Levy vs. Oil and Gas Royalties

The COVID-19 levy alone nearly matched non-renewable oil royalties, highlighting its fiscal importance. Total scrapped revenues exceed many sectoral contributions, like cocoa royalties (historically GH¢2-3B), forcing reliance on corporate taxes and VAT growth.

Tax Compliance Models: Ghana vs. Peers

Ghana’s compliance push mirrors Kenya’s post-e-levy adjustments, where digital taxes boosted collections by 20% via iTax portals. However, Nigeria’s betting tax retention yielded steady gains, contrasting Ghana’s abolition strategy.

Legal Implications

The abolitions stem from legislative amendments in the 2026 Budget Statement presented to Parliament. Under the Public Financial Management Act, 2016 (Act 921), such changes require approval, ensuring legal backing. Taxpayers face no retroactive liabilities, but ongoing obligations under the Income Tax Act, 2015 (Act 896) and VAT Act, 2013 (Act 870) remain. Enhanced GRA audits for compliance are authorized by the Revenue Administration Act, with penalties for evasion intact. No new legal risks arise directly, but businesses must update contracts reflecting tax changes to avoid disputes.

Conclusion

The Ghana 2026 budget represents a high-stakes gamble on tax compliance to replace abolished revenues from e-levy, betting tax, and COVID-19 levy. Dr. Adu Owusu Sarkodie’s warnings underscore the need for robust GRA enforcement and public education. If successful, this could modernize Ghana’s tax system, fostering inclusive growth. Stakeholders must prioritize compliance to mitigate risks and support national fiscal health. Stay informed on GRA guidelines for the best outcomes in this evolving landscape.

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