Ghana’s finance minister, Ken Ofori-Atta has revealed the government’s plans to introduce an electronic transaction levy (e-levy) starting on 1st February 2022. The government hopes to widen the tax net and tax the informal sector which employs up to 85 per cent of Ghanaians.
The e-levy will be 1.75 per cent of the value of all electronic transactions above 100 Ghana Cedis (USD 16) per day and it will be borne by the originator of the transaction except for inward remittances which will be borne by the recipient. Electronic transactions will include mobile money payments, bank transfers, merchant payments and inward remittances.
The Rise of Digital Transactions in Ghana
The finance minister noted that total digital transactions in 2020 stood at Ghana Cedis 500bn (USD 81bn) up from Ghana Cedis 78bn (USD 12.5bn) in 2016. This can be attributed to the COVID19 pandemic where people resorted to mobile money, bank accounts and cards transactions/payments for their daily economic activities.
This led to the value of digital transactions rising by 120 per cent between February 2020 and February 2021. The previous year, it had risen by 44 per cent. More and more people are now accustomed to online transactions, hence it is a convenient way for the government to raise revenues.
Opposition to the e-levy
The eCommerce Association of Ghana was quick to point out the disadvantages of this tax. In a statement, it said that the tax has the potential to send the largely unbanked population back to the days of financial exclusion and erode all the gains made by the government in its digitalization agenda.
It also pointed out that it would have a negative toll on the use of digital payments compared to the cash is king era, a reduction in online sales and increased cash transactions which would endanger the safety of delivery riders. It sought to engage the government on better ways to go about this.
Stakeholders are also worried that this e-levy could derail the growth of the Ghanaian Fintech ecosystem that is still in its nascent stage. The tax will reduce the profit margins of the startups who will not want to pass the cost to their customers and will also scare away those that wish to expand into Ghana.
Tanzania and Uganda are some of the other countries that imposed taxes on electronic transactions. In 2018, Uganda introduced a 1 per cent tax on mobile money before revising it to 0.5 per cent following public outcry.