Toll booths have been a significant source of funding for Ghana's road infrastructure for decades, collecting fees from motorists to maintain the country's network of roads. In 2021, however, the government made a bold decision to abolish toll booths and introduce the Electronic Transfer Levy (E-Levy) as a modern alternative for revenue collection. The rationale was clear, toll booths were plagued by inefficiencies, corruption, and traffic congestion. This article explores the pros and cons of both systems and examines whether blending old and new policies could offer a more sustainable solution.
Toll Booths and E-Levy in Focus
In 2021, the government abolished abolish toll booths to expand the tax net. While the tool booths were visible sources of revenue, they were plagued by corruption , inefficiencies, and traffic congestions. Over GHS 9m collected as road toll was unaccounted for between January and June 2010.
The E-Levy emerged as a digital solution, targeting electronic transactions to create a broader revenue base. The new system taps into mobile money payment and bank transfer, promising efficiency in raising revenue. Again, there was a different cost related to making that switch: getting rid of the toll booths meant the loss of jobs for the tens of workers who made their living from the system.
Moreover, while the E-Levy has the potential, its implementation has faced public resistance due to perceived unfairness and a lack of clarity on its impact.
The Current Debate: Should Toll Booths Make a Comeback?
The suggestion to reintroduce toll booths have been received in various ways across Ghana. Proponents say this is a very tangible revenue collection stream pegged on the usage of infrastructure. This, in contrast to E-Levy, spreads the cost across all electronic transactions.
It therefore becomes some kind of "user pays" at the toll booth.
Supporters also highlight the employment opportunities that toll booths can generate. For communities affected by the 2021 abolishment, the reintroduction offers a chance to restore livelihoods and stimulate local economies.
However, critics warn against rejoicing in the comeback of the toll booths , because inefficiencies and corruptions most likely will come along again, and the problems of traffic congestions, though still there, may continue to go beyond control, reverting all the improvement in travel efficiency. In any case, the E-Levy digital-first approach will more befit Ghana's bigger goals of expanding tax net and efficiency.
Economic Implications: Comparing Toll Booths and E-Levy
As Ghana debates whether to bring back toll booths or rely solely on the e-levy, a key question emerges; which system is more effective at generating sustainable revenue for infrastructure? Both approaches have financial implications, but their efficiency and impact on the economy differ significantly. Let us compare the revenue contributions and economic trade offs of each.
Total revenues from the toll booths reached about GHS 74.98 million in the period ranging between January and November 2021. However, the funds collected were usually insufficient and undermined by corruption. The administrative cost of running the toll booths also eroded the net contribution. On the other hand, the E-Levy reaches a wider audience, creeping into Ghana's growing digital economy. Even though its introduction faced challenges, it has the prospect of revenue capture from so many sources. The Ghana Revenue Authority collected GHS 1.19 billion in 2023 .
As Ghana debates whether to bring back toll booths or rely solely on the E-Levy, a key question emerges: Which system is more effective at generating sustainable revenue for infrastructure? Both approaches have financial implications, but their efficiency and impact on the economy differ significantly. To understand this, let's compare the revenue contributions and economic trade-offs of each system.
Reintroducing toll booths could alleviate the burden on those who do not use roads frequently. But doing so might introduce additional costs to transport operators and logistics businesses, ultimately leading to higher consumer prices. The need to find a balance between localized and broad-based revenue collection remains a critical challenge for policymakers.
Infrastructure and Public Sentiment
The quality of Ghana's roads and public opinion about toll booths are central to this debate. Poor road conditions in some areas highlight the urgent need for sustainable funding mechanisms. After the removal of toll booths, travellers appreciated the improved traffic flow. The only question that remains unanswered is how the roads would be maintained without a dedicated stream of revenues assigned to them.
The opinion in the public domain remains divided, with some citizens believing in the user-pays model, while others believe the use of toll booths is outdated for Ghana's digitalization journey.
Political Dynamics Behind the Debate
The political motivations behind reintroducing toll booths cannot be ignored. The suggestion by the Minister of Finance, Dr. Cassiel Ato Forson , for the reintroduction of tolls may reflect broader government strategies to address criticisms of the E-Levy. It could also be a response to the economic hardships faced by former toll booth workers and communities affected by their removal.
At the same time, this proposal raises questions about consistency in public policy. Reintroducing toll booths after a high-profile abolishment risk creating confusion and undermining public trust. Is this a genuine attempt to improve infrastructure funding, or political to appease critics?
Forward-Thinking Solutions: Rethinking the e-levy for inclusive and sustainable development
Reintroducing physical toll booths in Ghana presents several challenges that outweigh their potential benefits. The Electronic Transfer Levy (E-Levy) has demonstrated a greater capacity for revenue generation compared to traditional toll booths. In 2023, the Ghana Revenue Authority collected GHS 1.19 billion from the E-Levy, significantly surpassing the approximately GHS 74.98 million generated by toll booths between January and November 2021.
Beyond revenue considerations, physical toll booths contribute to traffic congestion, leading to increased travel times and reduced productivity. The bottlenecks at toll plazas not only frustrate commuters but also have economic implications, such as higher fuel consumption and vehicle maintenance costs. Moreover, the reintroduction of toll booths would incur substantial costs, including construction, maintenance, and staffing expenses.
Given these factors, it is advisable for Ghana to focus on optimizing the E-Levy system rather than reverting to physical toll booths. The following can be considered:
Shifting from transaction-based to income-based taxation principles. Thus, apply the e-levy primarily to recipients of electronic funds. This can directly address tax evasion without penalizing digital transactions themselves, and broadening the tax base in a fairer manner. For instance, introducing a system where transactions are automatically grouped based on business income, personal transfers, and essential payments, allowing targeted taxation only on income generating transactions.
The e-levy should exempt transactions related to essential services such as tax payments, education fees, healthcare bills, and utility services. This approach would prevent double taxation.
Imposing the levy on the service fees charged by telecommunication companies directly. The telcos already apply fees to transactions, therefore, incorporating the e-levy into these charges would simplify the process and reduce public opposition.
Ensure transparency and accountability in the use of e-levy funds can build public confidence. Regularly reporting on how the funds are channelled to development projects, especially those that benefit the taxpayer, will promote public trust and compliance.
Ghana is not alone in facing challenges related to digital taxation. Several countries have successfully implemented fair and efficient electronic levies, providing valuable lessons:
Kenya introduced a mobile money tax in 2018 but later revised it to target high-value transactions, ensuring that low-income users were not unfairly burdened.
Uganda initially taxed all mobile money transactions but later shifted the tax to only withdrawals after public backlash.
Maintaining and improving the E-Levy aligns with Ghana's digitalization goals and offers a more efficient, cost-effective, and equitable solution for infrastructure funding. Reintroducing physical toll booths should only be considered if the E-Levy is discontinued, as the challenges associated with toll booths outweigh their benefits in the current context.
Author
Solomon Adu Sarpong
Policy Research Fellow
Institute for Liberty and Policy Innovation (ILAPI)
Tema
Image Source: CITINEWSROOM https://citinewsroom.com/2019/04/roads-ministry-pushes-for-increase-in-road-tolls/
