Ghana, a nation situated on the Atlantic Ocean and bordering Togo, Côte d'Ivoire, and Burkina Faso, has made significant strides in economic and social progress, achieving middle-income status in 2011. With a population of approximately 34.4 million in 2024, Ghana has embraced a multi-party system, fostering an independent judiciary that has garnered public trust. However, challenges remain, particularly in leading Ghana on a path of debt sustainability by enhancing fiscal discipline, expanding tax revenue, and completing debt restructuring with external creditors under the IMF program.
Taxation is the main source of government revenue. Its share of total revenue (including grants) averaged about 78% between 2013 and 2024. Even though Ghana’s tax effort [tax revenue-to-Gross Domestic Product (GDP)] has been low, fluctuating around 10-12% between 2013 and 2022, there has been some improvement following the country’s Extended Credit Facility Programme with the International Monetary Fund (IMF) in 2023. For instance, the tax-to-GDP ratio in 2023 was estimated at 17.2%; this was projected to rise to 17.9% in 2024 and to 18% in 2025 in line with the Medium-Term Revenue Strategy (2024-2027). It is worth noting that tax revenue consists of only those taxes that are administered and received by the Ghana Revenue Authority (GRA) (comprising direct and indirect taxes, and international trade taxes).
The Ghanaian domestic economy in 2012 revolved around services, which accounted for 50% of GDP and employed 28% of the work force. Ghana became the largest gold-producing country in Africa after overtaking South Africa in 2019. The country is also the second-largest cocoa producer (after Ivory Coast). Ghana is rich in diamonds, manganese or manganese ore, bauxite, and oil.
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The financial services in Ghana have seen a lot of reforms in the past years. The Banking (Amendment) Act 2007 included the awarding of a general banking license to qualified banks, which allows only indigenous Ghana offshore banks to operate in Ghana. The Stock Exchange of Ghana is one of the largest in Africa, with a market capitalization of GH¢57.2 billion or CN¥180.4 billion in 2012.
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Ghana discovered significant reserves of oil and natural gas offshore throughout the 2000s and 2010s. The country officially became an oil & gas producer in 2010 with the commissioning of the Jubilee field by Tullow Oil and currently produces from three major offshore hubs: Jubilee, TEN, and OCTP. Ghana has aggressively begun the construction of solar plants across its sun-rich land in an aim to become the first country to get 6% of its energy from solar energy generation. Ghana has Class 4-6 wind resources and high-wind locations, such as Nkwanta, the Accra Plains, and Kwahu and Gambaga mountains. Ghana has 5 billion barrels (790×106 m3) to 7 billion barrels (1.1×109 m3) of petroleum in reserves.
Composition of Tax Revenue
The composition of tax revenue did not change significantly between 2013 and 2024. Direct taxes (mainly corporate and personal income taxes) constituted about 47% of tax revenue (between 2013 and 2024:Q2), although their share fluctuated during the intervening years. The personal income tax regime is progressive. Although the standard corporate income tax (CIT) rate is 25%, the rate varies (between 8% and 35%) across businesses, depending on the location of business and the type of industry, thereby exhibiting some elements of progressivity.
For instance, the CIT for manufacturing companies located in regional capitals (except Accra and Tema8) is 18.5% while the rate for those located outside of Accra, Tema, and the regional capitals is 12.5%. Similarly, the share of indirect taxes in total taxes was about 41%, with value added tax (VAT) constituting about 60% of indirect tax revenue. Although VAT exhibits some progressivity since it has three tax categories (exempt, 3%, and 15%) based on turnover thresholds, all consumers are subjected to 15% VAT regardless of income level when they buy products subject to VAT from VAT-registered businesses.
Shoppers browsing at the Kejetia market in Kumasi, Ghana. It is one of the largest outdoor markets in Africa.
Fiscal Policy and Challenges
Ghana’s macroeconomic situation became more challenging in 2022, recording its worst performance in the last three decades. The increase in government spending and decline in revenues due to the COVID-19 pandemic’s impact on the economy caused a worsening of the primary deficit and overall fiscal deficit in 2020. The financial sector cleanup costs and rising interest bills also contributed to the worsening fiscal and external position. Although the deficits declined marginally in 2021 following the government’s restraint in spending, this was short-lived, and 2022 was a crunch year. Interest costs on both domestic and external borrowing began rising in 2021. Public sector borrowing became a burden on the budget.
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Even though Ghana’s macroeconomic situation and credit ratings have improved, with significant gains recorded beginning 2025:Q2, the country’s current program with the IMF places a limit on the size of the fiscal envelope, and access to the ICMs remains restricted. Real incomes of many have been eroded by high inflation since 2022, and there is not much appetite for increased taxation.
In the last decade, the government has introduced revenue-increasing measures, but some have not been successful. The first was a tax on financial assets, and the second was a recent attempt to widen the tax net by roping in the informal sector. The first attempt failed because it did not take into account the political nature of the proposed tax measures. The second attempt failed partly because of conflicting objectives and because it was based on the false narrative that informal operators do not pay taxes; moreover, it didn’t take into account the heterogeneity within the informal sector, which spans both subsistence-level operators and profitable enterprises.
Failed Tax Initiatives
Individual income from investments in financial assets of resident financial institutions and government treasury bills and bonds are currently not taxed. In 2016, the government attempted to introduce a one-percent tax on interest earned on financial assets. Taxing this component of the incomes of the non-poor was intended to introduce more fairness into the system because it would capture a substantial share of the higher-income individuals whose income was not captured in the tax net. It was withdrawn a couple of weeks after it was set to take effective-most likely because of public outcry from wealthy elites who wield outsized influence on government policy.
If the government should consider re-introducing a tax on financial assets, which would be an important revenue source, its timing will be critical to avoid failure. This is because the domestic debt restructuring program that was completed in 2023 reduced the present value of holdings of government bonds by an average of about 30%. There is likely to be resistance to a further reduction in investment income through taxation. In addition, the tax rate should be set at a level that does not discourage investment in domestic financial markets.
The introduction of new tax measures must be preceded by stakeholder engagement that provides information on how the expected revenues will be spent. The information should go beyond specifying sectors that will benefit from additional spending to include how different groups will benefit. It is important to develop an effective constituency in support of the new taxes.
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The E-Levy and Its Aftermath
The second reform identified taxes on digital transactions as a potential source of revenue. The introduction of the e-levy triggered widespread protests and the rejection of the 2022 National Budget by the opposition party in Parliament for the first time since 1981. There were negative sentiments and disagreements among the public despite the government providing information on how the tax revenues would be utilized. The e-levy subsequently became one of the key issues in the 2024 general elections campaign, with the leading political parties promising to abolish it.
Three issues doomed the e-levy: failure to adequately consider the heterogeneity of informal sector operators with minimum thresholds that exclude subsistence-level operators; the administrative burden on small and micro firms to register; and the political backlash given the lack of trust in the government concerning how the additional revenue would be used.
Tax Administration and Compliance
Revenue collection is constrained by low enforcement. The use of third parties, such as firms that provide information on income and profits and collect taxes on behalf of the government (via the pay-as-you-earn system, for example), has been found to enhance tax collection. However, third-party participation is limited in countries such as Ghana, where own-account workers and micro-sized firms dominate and where bookkeeping is not widespread.
Some existing tax handles do not generate as much revenue as they could because of administrative weaknesses and challenges in the collection of taxes. This is particularly the case for taxes on rental income and property rates. The unified common property rate platform is the most recent effort to improve collection of property taxes. It is a collaborative effort between the GRA and local governments.
Tax compliance is low. Revenue from corporate taxes is estimated to be below the potential. Improved targeting of large companies can increase tax revenues. This will require skilled and committed tax officials because large companies will have an incentive to implement measures to reduce or avoid tax payments.
Taxpayers want information on how much tax is collected and what the revenue raised has been used for. The information provided by tax authorities should be simple to understand and easy to access. The radio, television, and town hall meetings have been suggested by taxpayers as preferred mediums for interaction between taxpayers and tax authorities.
Ghana’s 2025 National Budget
Ghana’s 2025 national budget, themed “Resetting the Economy for the Ghana We Want,“ sets ambitious fiscal targets to stabilise the economy while addressing critical national concerns. The budget aims to balance economic development with fiscal consolidation, with an overall GDP growth rate of 4.0% forecast and an end-period inflation target of 11.9%.
The 2025 budget estimates a total revenue of GH₵224.9 billion, representing 16.1% of GDP. Tax revenue accounts for the majority of revenue, contributing GH₵181.6 billion (13% of GDP). Non-tax revenue derived from fees, levies, and other government charges is set to generate an estimated GH₵16.2 billion (1.2% of GDP). Ghana’s continued dependence on natural resources is reflected in the projected oil revenue GH₵16.5 billion, accounting for 1.2% of GDP. Fiscal expectations from external aid are limited, with GH₵10.6 billion (0.8% of GDP) anticipated from grants and other sources. The projected spending for 2025 is GH₵268.8 billion (19.2% of GDP), creating a budget deficit of GH₵43.8 billion (3.1% of GDP).
The budget allocates GH₵76.6 billion (5.5% of GDP) for compensation of employees, reflecting the high wage bill in the public sector. Interest payments on public debt amount to GH₵64.2 billion (4.6% of GDP), highlighting the significant strain debt servicing has on national finances. This allocation exceeds the capital expenditure of GH₵32.9 billion, 2.4% of GDP, for infrastructure and development projects.
The 2025 budget focuses on critical sectors for national growth. Education receives significant funding, including GH₵3.5 billion for Free SHS, GH₵203 million for teacher trainee allowances, and GH₵499.8 million for the No-Academic-Fee policy. The NHIS receives GH₵9.93 billion in healthcare financing to improve medical access.
External Factors and Concerns
Various external economic conditions, debt obligations, and political underpinnings influence Ghana’s 2025 budget. One of the primary concerns is debt sustainability, as the government attempts to manage its public debt levels through fiscal prudence and restructuring measures. Fluctuating commodity prices, notably for gold and oil, affect revenue projections since downturns can deepen budget deficits.
The reliance on tax revenue may result in increased enforcement of tax compliance, potentially affecting businesses already struggling with inflation and financial uncertainty. The high cost of debt payment calls into question Ghana’s fiscal strategy’s long-term viability. If not adequately managed, continuous borrowing to finance deficits could cause long-term economic instability.
Local Government Funding in Ghana
Ghana’s current decentralised local government system started in 1998. Regarding the finances of local governments (Metropolitan, Municipal and District Assemblies, MMDAs), the constitution of Ghana mandates the central government to allocate 5% of the total revenues of Ghana and set aside as to be distributed to the local governments in Ghana based on a parliamentary-approved sharing formula. In addition, local governments in Ghana are constitutionally mandated to collect imposed rates and non-tax and tax revenues. This non-tax revenue includes licence rates, fees, and fines.
Revenue Sources of the Government of Ghana in 2024
In 2024, Ghana’s government recorded total revenue of GHS 186 billion, a significant portion of which 81% or GHS 151.16 billion came from taxes. These included levies on income and property, domestic goods and services, international trade, and more.
The single largest component was Taxes on Income and Property, amounting to GHS 78.74 billion. This was followed by Taxes on Domestic Goods and Services (GHS 60.50 billion) and International Trade Taxes (GHS 19.92 billion). Interestingly, tax refunds of GHS -8 billion reduced the net revenue, highlighting ongoing adjustments or incentives.
Outside of tax revenues, the government secured GHS 35.44 billion from other sources:
- Non-Tax Revenue: GHS 27.73 billion
- Other Revenue: GHS 4.93 billion
- Grants: GHS 1.72 billion
- Social Contributions: GHS 1.06 billion
This mix reveals that while grants and social contributions still feature in the fiscal framework, Ghana’s public finance model is heavily tax-reliant.
| Revenue Source | Amount (GHS billion) |
|---|---|
| Taxes on Income and Property | 78.74 |
| Taxes on Domestic Goods and Services | 60.50 |
| International Trade Taxes | 19.92 |
| Tax Refunds | -8.00 |
| Non-Tax Revenue | 27.73 |
| Other Revenue | 4.93 |
| Grants | 1.72 |
| Social Contributions | 1.06 |
| Total Revenue | 186.00 |
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