Economist and Professor of Finance at the University of Ghana, Prof. Godfred Bokpin, has welcomed the government’s decision to abolish the COVID-19 Health Recovery Levy but cautions that the policy will initially create a temporary shortfall in tax revenue mobilisation.
Despite revenue for 2026 being projected at GH¢268.1 billion against programmed expenditure of GH¢302.5 billion, leaving a GH¢34.4 billion fiscal gap, equivalent to 2.1% of GDP, Prof. Bokpin believes the deficit can be narrowed through improved tax administration and compliance measures recently introduced by government.
He further said the latest reforms to the Value Added Tax (VAT) system, particularly the scrapping of the COVID-19 Levy, would ease the cost burden on businesses and support expansion.
“The idea is that once the pressure on businesses reduces, they will be able to expand. In the medium to long term, the government will earn more revenue as these businesses grow,” he explained.
While praising the reforms, Prof. Bokpin argued that Ghana’s 20% standard VAT rate remains excessive and counterproductive. Citing research findings, he said Ghana’s optimal VAT rate is about 18%, adding that increasing the rate beyond that threshold undermines economic activity.
He urged the Finance Minister to consider reducing the VAT rate further—from 20% to 18%—in the 2027 Budget to better align Ghana with regional peers. Nigeria’s VAT rate stands at 7.5%, while many African economies operate around 18%.
Prof. Bokpin warned that Ghana’s relatively high VAT rate, combined with a strengthening cedi, could encourage smuggling from low-tax jurisdictions such as Nigeria.
A high VAT rate, he added, also raises production costs and works against Ghana’s export-led industrialisation strategy.
Presenting the 2026 Budget to Parliament, Finance Minister Dr. Cassiel Ato Forson confirmed the abolition of the COVID-19 Levy and outlined a broad package of VAT reforms intended to inject GH¢3.7 billion into the economy and return close to GH¢6 billion to households and businesses.
Key measures include:
• Reduction of the effective VAT rate from 21.9% to 20%
• Increase in VAT registration threshold from GH¢200,000 to GH¢750,000
• Restoration of input tax deductibility for GETFund and NHIL
• Simplification of VAT structures to eliminate distortions and strengthen compliance
Dr. Forson said the reforms would reduce the cost of doing business by up to 5% and spare SMEs from excessive tax compliance obligations.
“We promised to abolish the COVID-19 Levy. With the support of this House, I am happy to announce that it is abolished,” he said, stressing that the move forms part of government’s “responsible but compassionate economic management.”
The Finance Minister also highlighted worrying revenue leakages at Ghana’s ports. An audit found major lapses in valuation, classification and cargo inspection, with GH¢204 billion worth of imports recorded in 2024 but only GH¢85 billion deemed taxable, an indication of widespread under-invoicing and misclassification.
To address this, the government will deploy AI-driven pre-arrival inspection systems for all imports. The technology will detect undervaluation, flag high-risk shipments and enhance Customs’ ability to combat smuggling and secure revenue.
“By integrating automation into port operations, we expect to significantly boost customs revenue, enhance trade efficiency and close long-standing revenue gaps,” Dr. Forson noted.