Former Finance Minister, Dr Kwabena Duffuor, has rejected the proposed E-levy in the 2022 budget statement.
Apart from this levy destroying the digitalization agenda, he said, it will also be characterized by serious implementation challenges.
Delivering a public lecture in Accra on Monday, November 29, he said “It is now well known that Ghana is facing a large infrastructure deficit and that this is affecting the sustainability of high economic growth rates; leading to underdevelopment, high unemployment rates and low-income levels.
“To be able to reverse the declining trend so as to ensure rapid and sustainable growth of the economy, improve job creation and thus reduce the high rate of unemployment, adequate fiscal space needs to be created by the government. Indeed there is an urgent need for a budgetary room that will allow the government to provide the needed resources for public investment without undermining the already weak fiscal situation.
“And it was for this reason that government in the 2022 Budget decided to widen the tax net by imposing the ‘Electronic Transaction Levy’ or ‘E-Levy’ of 1.75% on electronic transactions covering ‘mobile money payments, bank transfers, merchant payments, and inward remittances” to be borne by the sender, except inward remittance, which would be borne by the recipient’.
“It should, however, be noted that taxes/levies are imposed on incomes/gifts, consumption, and held properties or assets. Electronic transfers/payments are none of these. An electronic transfer usually represents a mode of payment or settlement. And indeed, modes of payment should not attract taxes/levies. This is because taxing modes of payment could lead to instantaneous double taxation, since the underlying income, the commodity would have normally been taxed already.
“This makes the proposed E-Levy problematic because it could be fraught with serious implementation challenges. This tax could undermine the Ghanaian Digital Economy.
“Once again, the IFS would like to remind the government that there is so much additional revenue that can be generated from the extractive sector, which is currently left in the hands of private investors who extract publicly endowed resources in the sector. Our estimates show that by adopting the same approach that Ghana’s peers use to generate revenue from their extractive sector (oil and mining subsectors), Ghana can generate an additional US$4.3 billion from the sector yearly. Currently, this amount is equivalent to more than GH€25 billion. This lost revenue clearly dwarfs the GH 6.9 billion in revenue that the proposed E-Levy is projected to fetch the country in 2022.”
Finance Minister Ken Ofori-Atta announced a new levy to be charged by the government in 2022 on all electronic transactions to widen the tax net and rope in the informal sector.
“It is becoming clear there exists an enormous potential to increase tax revenues by bringing into the tax bracket, transactions that could be best defined as being undertaken in the ‘informal economy,” Mr Ofori-Atta observed on Wednesday, November 17 as he presented the 2022 budget statement in Parliament.
“After considerable deliberations, the government has decided to place a levy on all electronic transactions to widen the tax net and rope in the informal sector. This shall be known as the ‘Electronic Transaction Levy or E-Levy’.”
He explained that the new E-levy will be a 1.75 per cent charge on all electronic transactions covering mobile money payments, bank transfers, merchant payments and inward remittances to be borne by the sender except inward remittances, which will be borne by the recipient.
This will, however, not affect transactions that add up to GH¢100 pr less per day.
“A portion of the proceeds from the E-Levy will be used to support entrepreneurship, youth employment, cyber security, digital and road infrastructure among others.”
This new levy is scheduled to start Saturday, January 1, 2022.
In 2020, total value of transactions was estimated to be over GH¢500 million with mobile money subscribers and users growing by 16 percent in 2019.
According to a Bank of Ghana report, Ghana saw an increase of over 120 percent in the value of digital transactions between February 2020 and February 2021 compared to 44 percent for the period February 2019 to February 2020 due to the convenience they offer.
This was definitely heightened by the advent of Covid-19, especially during the lockdown.
But Parliament has rejected the 2022 budget statement presented on behalf of President Nana Addo Dankwa Akufo-Addo by his Finance Minister, Ken Ofori-Atta, on Wednesday, November 17.
The Majority members had staged a walkout during proceedings on Friday, November 26 but that did not stop the Speaker, Alban Bagbin, from ruling on the motion.
He had given a five-minute break for the Majority members to resume their seats.
