The Ghana Revenue Authority (GRA), starting July 1, 2025, will implement a 15% Value Added Tax (VAT) on all non-life insurance premiums, excluding motor insurance. This new tax regime targets property, health, and travel insurance policies and forms a key component of the government’s 2025 budget strategy to broaden the national tax base and bolster public sector funding. The decision signals a significant shift in the taxation of insurance products and is expected to generate substantial revenue for the government, allowing for increased investment in public services and infrastructure projects. However, the move also raises concerns about its potential impact on household finances and the operations of small businesses.
The inclusion of non-life insurance premiums within the VAT framework reflects the government’s effort to tap into a previously untaxed sector. By expanding the tax base, the government aims to reduce its reliance on traditional revenue streams and create a more diversified and sustainable fiscal framework. This approach is seen as crucial for supporting Ghana’s development agenda and addressing the growing demand for public services, including healthcare, education, and infrastructure development. The projected revenue from the VAT on insurance premiums is expected to contribute significantly to financing these critical sectors, enabling the government to implement programs and projects aimed at improving the quality of life for its citizens.
However, the implementation of this new tax carries substantial implications for both individuals and businesses. Consumers purchasing property, health, or travel insurance will experience a direct increase in premiums, adding to the existing financial burdens faced by many households, especially in the context of rising living costs. For businesses, the increased cost of insuring their assets and operations could strain their financial resources and potentially impact their ability to invest and expand. This could particularly affect small and medium-sized enterprises (SMEs), which often operate on tighter margins and may have limited capacity to absorb additional costs.
The potential impact on insurance coverage is another area of concern. The increased cost of premiums could discourage individuals and businesses from maintaining or acquiring necessary insurance protection. This could leave them vulnerable to financial risks associated with unexpected events such as property damage, health emergencies, or travel disruptions. While insurance is a vital tool for mitigating these risks, the higher premiums may force some policyholders to reduce their coverage or forgo it altogether, potentially exposing them to significant financial losses in the future.
The government’s decision to exclude motor insurance from the VAT regime appears to be a strategic move to mitigate some of the potential negative consequences of the new tax. Motor insurance is already mandatory in Ghana, and adding VAT to it would have further increased the financial burden on vehicle owners, potentially leading to reduced compliance and increased uninsured driving. By excluding motor insurance, the government aims to maintain the affordability and accessibility of this essential coverage, while still expanding the tax base through other non-life insurance products.
In conclusion, the introduction of the 15% VAT on non-life insurance premiums, while intended to strengthen the government’s fiscal position and support public spending, presents a complex scenario with both potential benefits and drawbacks. The anticipated increase in government revenue could facilitate vital investments in public services and infrastructure, contributing to long-term economic growth and development. However, the added financial burden on households and businesses, coupled with the potential for reduced insurance coverage, raises concerns about the overall impact on the economy and the well-being of citizens. The government will need to carefully monitor the effects of this new tax policy and consider measures to mitigate any negative consequences, particularly for vulnerable populations and small businesses, to ensure a balanced approach that fosters both economic growth and social welfare.
