2025 Budget: Government limits tax refunds to 4%, expects GH¢3.8bn savings 

The government has announced an overhaul of Ghana’s tax refund system, introducing a new cap of four per cent of total domestic revenue to prevent abuse and streamline tax administration.

The policy, outlined in the 2025 Budget Statement and Economic Policy, is expected to save GH¢3.8 billion, which will be reallocated to infrastructure, healthcare, and education.

Presenting the budget to Parliament on March 11, 2025, Finance Minister Dr Cassiel Ato Forson said the current tax refund process was being exploited, leading to unjustified claims and revenue losses.

“The government has reviewed the tax refund mechanism and found that it is being abused, leading to excessive payouts,” Dr Forson stated.

“To address this, we are introducing a four percent cap on tax refunds, ensuring that funds are better managed and reinvested in priority sectors.”

Ghana’s tax refund system allows businesses to reclaim certain tax payments, particularly under VAT and corporate tax structures.

However, audits have revealed that some entities were inflating refund claims, leading to substantial losses in government revenue.

Dr Forson explained that the new cap aligns with global best practices and will prevent refunds from disproportionately draining public funds.

He noted that the objective is not to deny businesses their legitimate refunds but to curb fraudulent claims and promote fairness in the tax system.

To further tighten controls, the Ghana Revenue Authority (GRA) will be tasked with conducting stricter audits before approving refunds.

A digital tax administration system will also be expanded to track applications more efficiently.

The GH¢3.8 billion expected to be saved through the refund cap will be redirected to critical sectors, including infrastructure development to improve roads and public transportation, healthcare investment to expand health facilities and services, and education funding to strengthen basic and secondary school systems.

Dr Forson assured Parliament that the government remains committed to fiscal discipline while ensuring tax policies support both businesses and national development.

He stressed that while businesses rely on tax refunds for cash flow and reinvestment, the government also has a responsibility to ensure public funds are managed efficiently.