Ghanaian businesses and consumers are anticipating significant tax relief ahead of the 2026 Budget Statement presentation, scheduled for Thursday November 13, with high expectations centered on the withdrawal of the controversial COVID-19 Health Recovery Levy and reforms to the Value Added Tax (VAT) calculation system.
Finance Minister Dr Cassiel Ato Forson is expected to present the budget to Parliament, marking the first full year budget of the Mahama administration since returning to power following the December 2024 elections. Under the Public Financial Management Act, the Finance Minister is mandated to present the national budget to Parliament not later than November 15 each year.
The withdrawal of the COVID-19 levy was a campaign promise by the National Democratic Congress (NDC) and since assuming power in January this year, the promise has been repeated by both the Finance Minister and the President. During the 2025 Mid Year Budget Statement presentation to Parliament on Thursday July 24, Dr Forson announced that the much debated tax would be removed as part of sweeping reforms to Ghana’s VAT system.
The Finance Minister told lawmakers that the COVID-19 levy will be abolished, the effective VAT Flat Rate will be reduced, the punitive and cascading effects of the National Health Insurance Scheme (NHIS) levy will be removed, and Ghana Education Trust Fund (GETFUND) will be removed from the VAT structure. The VAT Flat Rate will be removed and a unified VAT rate will be implemented. He stated that the reforms would be finalized by October 2025 and integrated into the 2026 Budget.
Introduced in 2021 as a temporary measure to fund pandemic related expenses and economic recovery initiatives, the COVID-19 Health Recovery Levy currently adds 1 percent to the consumption base of standard VAT goods and services. Enacted by Parliament as Act 1068 on March 31, 2021, the levy imposes a 1 percent charge on the supply of goods and services made in Ghana as well as on imports, excluding exempt goods or services.
Market observers and industry groups have consistently argued that the levy has outlived its purpose and now acts as an unnecessary burden on the already strained cost of living. They argue that its continued application is punitive, especially for small and medium enterprises (SMEs) struggling with high utility tariffs and borrowing costs.
Economic analysts suggest that the withdrawal of these levies and the easing of the tax regime are critical steps required to boost private sector confidence, reduce consumer price pressures, and solidify Ghana’s commitment to the structural reform targets under its current economic programme. However, some analysts are worried that it could lead to a drop in government revenue, as the levy was projected to have generated some 1.3 billion cedis in the first half of 2025.
Commissioner General of the Ghana Revenue Authority (GRA) Anthony Sarpong disclosed that the 2026 Budget will include a review of the VAT, with the effective rate expected to be reduced from 22 percent to 20 percent as part of ongoing reforms to simplify the VAT structure and make it more business friendly. Speaking on PM EXPRESS Business Edition with George Wiafe on August 21, 2025, Sarpong noted that government is committed to reducing the tax burden on businesses.
The Commissioner General noted that they are working to decouple the levies that increase the final tax paid by businesses registered for VAT. He revealed that the new VAT bill should be ready by September 2025 and that should help the Finance Minister lay it before the end of 2025. Sarpong announced that the finance minister is expected to present the revised VAT regulations bill and the removal of the COVID-19 levy to parliament in 2025, however its implementation will take off from 2026.
Businesses are eagerly anticipating a reversion to the pre 2019 VAT calculation formula, which is expected to simplify the tax regime and eliminate certain ambiguities that currently add to the effective cost of business, particularly for importers. While the exact details differ depending on the specific sector, the anticipated move is expected to alleviate complexities surrounding input tax deductions and the method of assessing the tax base on certain imports.
The current calculation methods have inadvertently led to higher effective taxation for manufacturers and traders. Industry players say the simplification of the VAT base, returning to a clearer and less ambiguous formula, is not just about reducing the tax rate but is also about predictability and efficiency.
According to Dr Forson’s July announcement, stakeholder consultations between the Ministry of Finance, the Ghana Revenue Authority, and various interest groups across the country had already begun. The Ministry of Finance, in collaboration with the GRA, undertook a nationwide consultation process to sensitize key players in the trade and business sector on the VAT reform and solicit feedback from them. The consultation phase was expected to conclude by September 2025.
The decision to withdraw revenue streams, especially the levies, presents a delicate balance for the Finance Minister, who must maintain the need for economic relief with the government’s commitment to achieving a primary fiscal surplus. Both the COVID-19 levy and the specific VAT regime changes were implemented to broaden the tax net and ensure stability during difficult financial periods. Their reversal, while offering relief, will put pressure on the GRA to find alternative and more efficient ways to collect revenue to hit the government’s targets.
The Commissioner General rejected arguments that the expected 20 percent effective VAT rate is too high, stating that we are working very hard to improve compliance and that could see government reduce the rate further going forward. He announced that they have made significant progress in helping businesses to understand the current tax laws, a move that could go a long way to improve compliance.
The budget is expected to outline how the revenue shortfall from the anticipated withdrawals will be offset, likely through aggressive digitalization of the tax base, improved property rate collection, and enhanced efficiency in customs administration. The Finance Minister has pledged to raise Ghana’s tax revenue to gross domestic product (GDP) ratio from 13.8 percent to 16 percent, emphasizing improved compliance rather than new taxes.
With Ghana set to exit the International Monetary Fund (IMF) Extended Credit Facility programme in May 2026, attention will be on how the Finance Minister plans to manage the economy in the post programme period. The 2026 Budget will be one of the government’s most significant economic policy documents, setting the tone for fiscal management and growth strategy after the IMF programme.
Another key area of interest for industry players and economists will be how Dr Ato Forson intends to manage the fiscal deficit and expenditure in 2026 while maintaining macroeconomic stability. Early indications suggest the 2026 Budget will continue the government’s cautious path of fiscal consolidation, focusing on revenue mobilization, debt restructuring, and controlled spending.
Dr Forson has indicated in earlier interviews that the 2026 Budget will focus on job creation and economic growth stimulation. The Finance Minister expressed confidence that the reforms will not only provide relief to the average Ghanaian but also foster inclusive economic growth and restore macroeconomic stability.
The announcement was met with cautious optimism from segments of the business community and civil society, who have long called for a simpler and more coherent VAT system to reduce compliance costs and stimulate productivity. The reforms come at a time when the Mahama led government is pushing to reset Ghana’s economy through a combination of disciplined fiscal management, targeted investments, and an inclusive growth agenda.
As Thursday approaches, the prevailing sentiment is one of cautious optimism. The business community believes that the relief provided by these expected changes, one direct through COVID levy removal and one structural through VAT formula revision, is necessary to catalyze economic recovery. However, there is growing pressure from both within and outside the economic community for the government to move beyond stabilization and into transformation.
The tension between social compassion and fiscal discipline will define this budget. Ghana’s recovery from years of fiscal strain, external shocks, and debt distress has been real but fragile. The 2026 Budget will test whether Ghana can transition from recovery to real and sustainable growth, and whether its leaders have the courage to make difficult choices that may be unpopular today but necessary for the country’s economic future.
Source: newsghana.com.gh
