The controversial and infamous electronic transfer levy (e-levy) has been reduced from 1.5% to 1%, but it is yet to be implemented.
The reduction was occasioned by the passage of the Electronic Transfer Amendment Act, ACT 1089, 2022 by Parliament to amend the original law, ACT 1075, 2022.
The Minister of Finance, Ken Ofori-Atta, in his 2023 budget, asked Parliament to approve the reduction of the e-levy to 1% and also proposed that the daily ghs100 free transfer for mobile money wallets and ghs20,000 for bank accounts should also be removed.
But Parliament maintained the daily free transfer thresholds while approving the reduction of the levy to 1%.
Techgh24 gathered that stakeholders are waiting for a formal notice from the Commissioner-General of the Ghana Revenue Authority (GRA) before they can implement the reduced e-levy rate.
It would be recalled that government banked its hopes on collecting billions of Ghana cedis in just months from e-levy to prevent it from seeking an IMF bailout, but as of today, government is set to rollout an IMF bailout program because the e-levy has failed woefully to deliver the government’s ill-advised and over-ambitious expectations.
For instance, in the first two months of implementing e-levy, government projected to raise ghs1.46 billion but raised a paltry ghs93 million, which is not even up to 10% of the target.
Several stakeholders did warn government against implementing e-levy at a time when Ghanaians were facing economic hardship and several other jurisdictions on the continent were abandoning similar tax regimes. But the people running the Ghanaian economy felt they had a magic wand to make the “hustler” e-levy work, even if it meant dipping their long hands into the e-pockets of very poor people and taking their money just because they transferred more than ghs100 a day.
More harm than good
Just days ago, the Bank of Ghana approved an increment in mobile money wallet limits and value of transactions allowed in a day for various categories of customers.
The BoG and the industry players will not make any official statement on the exact reasons why they needed to raise the wallet limits and transaction values. But Techgh24 has learnt that it was in response to the harm e-levy has done and is doing to the ecosystem on a number of legs.
In the bid of Ghanaians to avoid e-levy and cope with the economic hardship, a significant number of people have refused to transfer more than ghs100 in a day from their own wallets. When people must transfer more than ghs100 in a day, they use mobile money merchants to do the transfer and they pay just the transfer fee and avoid e-levy.
The impact of this behavior is that individuals are recording lesser and lesser transactions on their own mobile wallets so government is losing out and the individuals are also unable to qualify for bigger mobile money loans. As a result, one bank for instance, which used to disburse over ghs20 million in MoMo loans daily, is now barely doing ghs8 million a day – that is a whopping 60% reduction in small loans to people who need it for their small businesses.
The ripple effect of that is that, the bank is unable to invest that money and make some profit and pay taxes, while the small businesses, which need the money are also unable to qualify for it due to the low value of transaction on their wallets. So, they are also unable to grow their businesses and pay taxes.
Now bigger businesses which used to transfer large sums of money from their bank accounts using instant pay platforms are now resorting to alternatives such as cheques and Direct Credit services for such payments to avoid e-levy.
Techgh24 has learnt that some businesses either break down their transfers into chunks of ghs20,000 over several days, or just use a cheque or Direct Credit which takes a few hours to clear as apposed instant pay. As a result there is an increase in the volume of transfers but the value of transfer is on the decline, and so is the expected e-levy and the earnings of the custodians of those platforms.
Clearly, e-levy is doing more harm to the ecosystem and to the economy than good, but the economy is run by people whose egos are too big for them to accept that their obnoxious “hustler” tax failed and it is time to just scrap it.
There is more than enough evidence to show that e-levy is a threat to the government’s own cash-lite economy agenda, but the managers of the economy have more personal interests to protect than to just do the right thing and on time.
GRA resorted to using e-levy as a tool to drive tax compliance among merchants. They decided to punish ordinary Ghanaians who buy from merchants who are not registered for VAT and Income Tax. A very disingenuous move that punishes innocent people, but they are still maintaining it, yet e-levy is still not yielding the expected dividends.
Surely, there will be a lot to account for when this government is out of office. An example is the huge moneys they paid out to contract a private sector agency to build a common platform for e-levy collection. There will be questions to answer regarding value for money.
Having said all that, we still maintain our position that e-levy is an obnoxious and a nuisance tax and anything short of a complete scrap is not good. The reduction from 1.5% to 1% within such a short time, is more than enough reason to completely do way with it. It is a waste of time and resources. There is no need to keep wasting more time and resources on this fruitless nuisance tax.
We wish to point out that the only real political alternative to the sitting president, former President John Dramani Mahama has promised to abolish e-levy when he returns to office. It is something to look forward to.