Rate of e-levy should be reduced to 0.5 per cent – Dr. John Kwakye

26th Nov 2021 | Source: Citi Newsroom

While many Ghanaians are still calling for a complete reversal of the proposed 1.75% tax on electronic transactions, as announced in the 2022 budget, others are calling for a reduction or readjustment in the rate to lessen the burden on Ghanaians.

For the Director of Research at the Institute of Economic Affairs, Dr. John Kwakye, a reduction of the rate to 0.5% would rather mitigate the plight of Ghanaians and at the same time achieve the purpose for which it is to be implemented.

“We note that the e-Levy alone is projected to contribute as much as GHc7.0 billion (or 8.7%) of the total tax revenue of GH¢80.2 billion projected for 2022. This is huge. It is like putting all your eggs in one basket. If for some reason, the projected tax intake fails to materialise, it will have a material effect on the budget,” Dr John Kwakye said.

“Further, customers will be paying the 1.75% levy on MoMo transactions in addition to the 1.0% already levied by telcos, bringing the total levy to 2.75%. This is very high. To ease the burden on customers and avoid any negative reactions, we would propose 0.5% for the e-Levy, bringing the total levy to 1.5%,” he noted.

The introduction of the 1.75 percent tax has been met with a lot of criticism since it was announced last week Wednesday in Parliament.

Although government officials have justified the move, saying that it is the right step in widening the tax net and roping in the informal sector, many have predicted a negative impact on mobile money transactions and the digitalization agenda.

Various stakeholders in different sectors of the country have also raised concerns about the policy.

The CEO of the Ghana Chamber of Telecommunications, Dr. Ken Ashigbey and tax analyst, Dr. Abdallah Ali Nakyea, for example, believe the introduction of the e-levy is ill-timed and not well-thought through.

Associate Professor at the Department of Economics at the University of Ghana, Prof. Festus Ebo Turkson, also argues that the new tax is too high and will discourage many people from performing digital transactions, which will ultimately lead to lower returns for the government’s projected revenue.

Already, the Minority Caucus in Parliament has vowed to kick against the government’s proposal for the implementation of the levy in the ongoing debate on the 2022 budget.