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Ghana’s E-Levy: No such thing as Government Money; there is only Taxpayers' Money | Nat. Dwamena

The former British Prime minister, Margaret Thatcher, in her 1983 address at the Conservative Party Conference stated that,

Let us never forget this fundamental truth. The state has no source of money other than the money people earn themselves. If the state wishes to spend more, it can do so only by borrowing your savings or by taxing you more. There is no such thing as public money, there is only taxpayers’ money’.

This simple fundamental truth was revealed by Margaret Thatcher a long time ago, yet, our Ghanaian society never gets weary of calling on the government to do everything in their livelihood with non-existing 'government money'. If you want the government to do it, then be ready to pay for it in a form of high taxes, levies and tariffs.

The ending year has its political schedules as Ghana 2022 Budget statement and economic policywas presented by the Finance Minister, Mr. Ken Ofori-Attah, in Parliament on 17th November 2021. Among the talking points in the budget, the introduction of the Electronic Transaction Levy (E-Levy) became alarming among Ghanaians.

The E-levy set out on page 74 of the budget statement specifically outlines the introduction of a 1.75% levy on electronic transactions covering mobile money payments, bank transfers, and merchant payments, and inward remittances.

Governments inevitably introduce new taxes with the hope of achieving revenue mobilization targets with little attention to cutting government spending or reducing wastage. It is not in the paying of taxes that troubles much, but how government waste tax-cedis. Every government needs taxes, however, E-levy should not be included, and here is why.

First, E-levy would overburden citizenry by imposing triple taxes on a single activity. E-levy would charge 1.75% on every transaction and surprisingly it includes merchant payment. Every item purchased and money earned has direct or indirect tax affect the price. Therefore, a tax on the electronic transaction would burden everyone with triple taxes on one activity. Thus, tax on the price of goods, tax on money earned to purchase desired goods, and tax on the electronic medium used to pay for the goods.

The E-levy would be imposed on Merchant transactions as well. Merchant originally does not pay charges from the Telecos for using electronic transaction. These merchants act as agents to help individuals deposit, withdraw and send money to their loved ones. Therefore, since E-levy is considering taxing merchants' transactions, then it will hugely dwindle the usage of mobile money.

Again, though the 2022 budget alluded to the increased mobile money transaction, the E-levy has a huge tendency of reducing electronic transactions among the populace. The total value of transactions in 2020 is estimated to be GHs500 billion. This is about a 94.5% increment compared to about Ghs257 billion in 2019.

The E-levy would not only reduce mobile money and electronic transaction but would make individuals increase the use of physical cash for their daily socio-economic activities. The increase in physical cash also has unintended consequences of increasing robbery incidents since more and more people would be undertaking their daily socio-economic activities carrying physical cash.

The introductory of E-levy goes contrary to the principles of taxation. Taxation must not be discriminatory. In this sense, E-levy is discriminating between those who use electronic transactions and those who don't.

In addition, taxation must be neutral, thus not affecting individual decision-making. The E-levy would affect individuals' decisions hence making individuals decide whether or not to use electronic transactions for their economic interactions and payment.

Also, paragraph 314 of the 2022 budget statement termed the electronic economy as 'shadow economy'. This shoots the government's digitization agenda and doubts its commitment to digitizing the economy. The emergence of E-government has allowed many to access government service easily.

The electronic transaction is traceable and records prime quality data on every transaction making it easy to track. Therefore, it is not a 'shadow economy' as portrayed by the budget statement. The E-levy is a disincentive to access e-government services and would rather make individuals live in the real 'shadow economy' where transactions can't be traced.

The E-levy exempts inward remittances by the recipients. This means only senders would borne the 1.75% tax burden when transferring to others and not recipients. Also, transactions that amount to Ghs100 or less are exempted from the E-levy.

Indeed, E-levy did not even spare children who are increasingly using digital platform dues to COVID-19.

As stated above, if you want the government to do, then you should be ready to pay taxes. However, the government should be efficient in spending tax-cedis and stop duplicating and investing in a project with no or little impact. Interestingly, the 2022 budget statement aimed to raise Ghs100 billion from taxes, E-levy inclusive (E-levy is projected to generate GHs6 Billion in revenue in a year).

Accountability is keen to achieve revenue mobilization targets. What is seen in every budget is the amount needed, new taxes, and new programs with less emphasis on accounting for the previous year's budget. Millions of tax-cedis are unaccountable for and find themselves in various scandalous actions in the auditor general's report.

In all, the E-levy should be on commission charged by Telecos and banks on electronic transactions. Simply, the 1% service on MoMo transactions could attract the 1.75% and the deducted from the sender’s money instead of a direct 1.75% on sender’s money.

That way, individuals will not be overburdened and electronic transaction would continue to be a welcoming medium for payment by the citizenry.




Article by

Nathaniel Dwamena


Photo Credit:

2021-12-18 01:11:51

Source: ILAPI