E-levy may not significantly widen government’s tax base – Deloitte
In a reaction to government’s defense for introducing the electronic transaction Levy which is that it will expand the current tax base, auditing firm Deloitte Ghana says the move will rather erode gains chalked by the mobile money platform and other electronic payments platforms rather than its intended purpose.
Finance Minister Ken Ofori-Atta indicated that the main objectives for introducing 1.75 percent levy on electronic transactions is to increase government’s revenue and rope in more of the informal sector participants into the tax net to contribute toward the country’s development.
However, according to the auditing firm, such schemes which was introduced in some countries such as Kenya, proved futile, as they reversed gains on the country’s financial inclusion agenda. Hence government must assess both the intended and unintended impacts of the proposed levy.
“Notwithstanding the opportunities this sub-sector presents for government to rake in the much-needed revenue, it is imperative for government to assess the impacts – both intended and unintended – of implementing the E-levy on retail electronic payments and overall financial inclusion in the country.
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“Studies have shown that the implementation of similar digital tax schemes in other countries (for instance Kenya) may not widen the tax base significantly, but rather reverse the gains on retail electronic payments and financial inclusion. Imposition of the E-levy has the potential of discouraging use of electronic payment systems while encouraging a cash preference and financial exclusion, especially for low-income earners,” noted Deloitte in its post-budget report.
The auditing firm is therefore advising government to rethink the policy, taking into consideration experiences of countries on the continent which have experimented with a similar levy and how it impacted their economy. And even if it is to be implemented at all, it should be a temporary levy that will go away in the future.
“We recommend that as government works on designing an implementation framework for the E-levy, it should also draw on lessons from the challenges other countries have encountered with the imposition of similar digital levies.
“More importantly, it is our view that government should explore other means of roping the informal sector into the tax net, which targets actual income generated by the informal sector players. If at all the E-levy is implemented, government could consider making this policy a temporary measure to avoid the erosion of gains made in the financial inclusion policy,” the report stated.
