Dr Emmanuel Ayifah
SEND GHANA has called on government to broaden stakeholder discussions on the e-levy and modify some elements of the levy.
In its assessment of the 2022 national budget Thursday in Accra, Send Ghana mentioned that “The Electronic Transaction Levy (e-transaction levy) of 1.75% on the value of digital transactions is a great idea, as it is expected to expand the tax net to rope in the informal sector. With expected revenue of approximately GH¢6.8 billion in 2022.
“However, we are concerned that the burden of the tax will fall more on the poor and vulnerable. The exempt daily transactions of a cumulative value of GH¢100 or less per person may not be adequate to cushion the poor and vulnerable groups. There are already rumors of panic withdrawals through Mobile Money transactions, and we fear this may erode the gains in financial inclusion as well as the country’s effort to go ‘cash lite.’”
Emmanuel Ayifah, Deputy Country Director, who addressed the media, said if the aforementioned advice was not heeded, “It may also be a disincentive to the growth of the digital economy. How do we separate ecommerce transactions from remittance from someone to his/her parents? Government should find innovative ways to implement the e-levy.”
Dr Ayifah said, “Stakeholder engagements and education will go a long way to demystify misconceptions related to the e-levy. The Ministry of Finance must consider modifying some elements of the levy, such as having a graduated rate, from 0.5%, 1%, 1.5%, and 1.75% based on the transaction value; and excluding certain services from it, for instance, from personal bank accounts to Mobile Money wallets and vice versa. We believe this will enable micro petty traders and the poor and vulnerable to continue taking advantage of digitisation to be financially inclusive.
He continued, “We further find inconsistencies in the effective date to start implementation of the e-levy. Whereas page 60, paragraph 247 of the 2022 budget indicates implementation is 1st January 2022, on page 74, paragraph 319 of the same budget document, it is stated that the e-levy policy comes into effect from 1st February 2022. So, which is which? The government needs to come clear on the effective date of implementation.”
He continued that it was an undeniable fact that domestic revenue mobilisation was the key to garnering the needed resources to support the country’s development agenda and make the vision of a ‘Ghana beyond Aid’ a reality.
“Consequently, the legislation of some new tax policy initiatives in the 2022 budget (Paragraph 247; page 60–61) to support domestic revenue mobilisation is a great idea. It will help address the country’s worsening tax-to-GDP ratio, and ultimately support the country’s fiscal consolidation and growth agenda.
“Ghana’s tax-to-GDP ratio over the past three years (13.1% in 2019, 12.4 % in 2020, and 15.7% in 2021) is way below the median tax-to-GDP ratio of 19.1% in Africa, 22.8% in Latin America, 34.3% in the OECD, and 26.2% worldwide. It is refreshing to note that the tax policy proposals will contribute to shoring up our tax-to-GDP ratio to 19.8% in 2022.
“The 2022 budget shows a projected increase in Domestic Revenue by 44%, which is explained by the impact of expected improvements in tax compliance, reforms in revenue administration, as well as the rack of tax policy initiatives. This is a welcoming development, and we embrace all effort at raking in more domestic revenue, as it will contribute in no small way to reducing the country’s reliance on borrowing to fund development needs. A major characteristic of a fair and just tax system is equity, where taxpayers contribute according to their ability to pay. Thus, as much as possible, our tax system should be progressive,” it added.
BY Samuel Boadi