Ghana’s COVID-19 Levy Equals Oil Royalties: Economist Warns of Massive Revenue Shortfall

Published: November 21, 2025 | In Ghana’s evolving tax landscape, the abolition of key levies like the COVID-19 Levy—which matched oil and gas royalties—sparks debate on fiscal sustainability. Learn from economist Dr. Adu Owusu Sarkodie’s analysis on Joy News.

Introduction

Ghana’s fiscal policy faces a pivotal moment as the government eliminates major taxes, including the COVID-19 Levy, E-Levy, and betting tax. Economist Dr. Adu Owusu Sarkodie has issued a stark warning: these moves could hollow out national revenue streams. Remarkably, the COVID-19 Levy generated nearly as much as Ghana’s total oil and gas royalties—GH¢2.8 billion versus GH¢2.9 billion this year—highlighting its critical role in public finances.

This article breaks down the economist’s insights from Joy News’ PM Express Business Edition, explaining the revenue implications of tax abolitions in Ghana. Whether you’re tracking Ghana tax reforms, oil royalties Ghana, or broader economic stability, understanding this shift is essential for grasping the future of the nation’s budget.

Analysis

Dr. Adu Owusu Sarkodie provided a detailed numerical breakdown, underscoring the scale of revenue losses from recent tax policy changes. These abolitions target levies introduced to bolster government income amid economic pressures.

Breakdown of Abolished Taxes

• E-Levy: This electronic transactions levy fetched approximately GH¢2 billion for the government.
• Betting Tax: Generated around GH¢300 million, supporting discretionary spending.
• COVID-19 Levy: Projected to yield GH¢3 billion next year, with GH¢2.8 billion this year—almost identical to total oil and gas royalties of GH¢2.9 billion.

The combined loss from E-Levy and COVID-19 Levy alone approaches GH¢5 billion, a significant dent in Ghana’s revenue base. Dr. Sarkodie emphasized that oil and gas royalties, while vital, are volatile due to global commodity prices, making alternative levies like the COVID-19 Levy indispensable stabilizers.

Government’s Compliance Strategy

The government counters these losses by banking on improved tax compliance. By lowering or removing rates, officials aim to widen the tax base—encouraging more Ghanaians to participate rather than evading higher burdens. Dr. Sarkodie noted this aligns with supply-side economics: “When you increase the base, if more people are paying, it’s better than a few people paying higher rates.” This pedagogical approach mirrors the Laffer Curve principle, where optimal revenue occurs at moderate rates.

Summary

In essence, Dr. Adu Owusu Sarkodie’s commentary reveals a high-stakes gamble in Ghana’s tax reforms. The COVID-19 Levy’s revenue parity with oil royalties in Ghana (GH¢2.8B vs. GH¢2.9B) amplifies concerns over its abolition. Coupled with E-Levy and betting tax removals, this could slash revenues by GH¢5 billion, testing the limits of compliance-driven growth. The discussion on Joy News underscores the tension between short-term relief for taxpayers and long-term fiscal health.

Key Points

Practical Advice

For businesses, investors, and citizens navigating Ghana’s tax changes, proactive steps can mitigate uncertainties.

For Taxpayers and Businesses

Embrace digital compliance tools to align with the government’s widened tax base strategy. Register for voluntary filings via the Ghana Revenue Authority (GRA) portal to avoid penalties as enforcement ramps up. Businesses in e-commerce or betting sectors, previously hit by E-Levy and betting tax, should budget for potential indirect costs like reduced public spending.

For Policymakers and Economists

Monitor real-time revenue data post-abolition. Implement phased reductions rather than outright eliminations to test compliance gains. Diversify beyond oil royalties by investing COVID-19 Levy proceeds historically into infrastructure yielding long-term returns.

Personal Finance Tips

Ghanaians should track budget adjustments, as revenue shortfalls may lead to spending cuts in health or education. Build emergency savings equivalent to 6-12 months’ expenses, anticipating economic ripples from fiscal policy shifts.

Points of Caution

While tax abolitions offer immediate relief, several risks loom large.

• Revenue Volatility: Oil and gas royalties fluctuate with Brent crude prices; losing the COVID-19 Levy removes a buffer.
• Compliance Assumptions: Historical GRA data shows evasion rates above 30% in informal sectors—unproven if lower rates will boost participation.
• Inflationary Pressures: Shortfalls might necessitate borrowing, elevating Ghana’s debt-to-GDP ratio (already over 80% per 2024 IMF reports).
• Social Impact: Levies funded COVID recovery; their loss could strain public services.

Dr. Sarkodie cautioned that without robust enforcement, the “enormous direction hole” (revenue gap) could undermine fiscal stability.

Comparison

Juxtaposing the COVID-19 Levy against traditional revenue sources reveals its outsized role.

COVID-19 Levy vs. Oil and Gas Royalties

The near-equivalence of COVID-19 Levy and Ghana oil royalties underscores a diversification win now at risk. Unlike royalties tied to Jubilee and TEN fields’ output, the levy tapped broad-based consumption.

Broader Tax Comparisons

Betting tax (GH¢0.3B) pales beside these giants, yet its abolition signals a holistic reform. Globally, similar moves in Kenya (post-Finance Act 2023) boosted compliance by 15% but initially dipped revenues 8%.

Legal Implications

Ghana’s tax abolitions stem from legislative processes under the Finance Act and parliamentary approvals, ensuring constitutional validity. No direct legal challenges are noted in Dr. Sarkodie’s remarks. However, the Public Financial Management Act (2016) mandates revenue projections; shortfalls could trigger IMF program reviews, as Ghana’s 2023-2026 Extended Credit Facility emphasizes fiscal consolidation. Taxpayers retain rights to appeal GRA assessments via the Taxpayers Bill of Rights.

Conclusion

Dr. Adu Owusu Sarkodie’s warning on the COVID-19 Levy’s parity with Ghana’s oil royalties crystallizes the stakes of tax abolitions. With a potential GH¢5 billion shortfall, the pivot to compliance-driven revenue expansion demands vigilant execution. As Ghana balances taxpayer relief with fiscal prudence, stakeholders must prioritize transparent monitoring. This reform could redefine Ghana’s tax revenue strategies, fostering inclusive growth if compliance surges—or strain budgets if it falters. Stay informed on GRA updates for the path ahead.

FAQ