E-Levy: Value of electronic transactions to fall in the short term but… – Tesah Capital
Asset Management Company (AMC), Tesah Capital, has averred implementation of the Electronic Transactions Levy (E-Levy) will in the short term, cause an immediate decrease in the value of electronic transactions – currently estimated at a value of Ghs 500 billion.
In the long term however, the value of electronic transactions will return to pre-tax levels and continue to grow.
A temporary fall in the value of electronic transactions, the AMC notes will be considered a huge success for government – as that implies electronic transactions will in the future rise.
“Data from Uganda and Congo, where a similar policy was implemented suggest that there will be an immediate decrease in the value of electronic transactions. However, in the long run the value of electronic transactions will return to pre-tax levels and continue to grow,” stated Tesah Capital in its 2022 Budget Highlights.
“Given the dire state of public finances in Ghana, a temporary decrease in the value of electronic transaction following the implementation of the policy will be considered a huge success for the government,” it added.
According to the AMC, the E-levy offers the government an opportunity to increase domestic revenue which is key in achieving its sustainable development goal although warning that its has the potential of negatively impacting government’s digitalization agenda.
Adding that, the success or failure of the E-Levy will be dependent on how incremental changes in the levy affects consumption behaviour for electronic transactions in Ghana.
The introduction of 1.75% E-levy by government is to provide the means to tax the informal sector and to help widen the tax net.
It is expected to increase the revenue generation capacity of the country with government projected to earn around Ghs 6.9 billion in revenue from the levy in its first year of implementation.
The E-Levy as announced by the Finance Minister, Ken Ofori-Atta in the 2022 budget presentation to Parliament, has been met with sharp criticisms with some analysts raising concerns about the levy’s negative impact on financial inclusion.
Though government believes it is a way to raise enough revenue to close the large fiscal gap, critics of the levy are of the view that it is a lazy approach by the government in raising revenue.
Experts are of the view that the new levy will promote informality and the cash economy as well as derail digitisation.
One of such experts is Economist Dr Aex Ampaabeng who says, “Most banks/ mobile money transfers are just “money transportation.” Moving money from one person to another with no value creation/device payment involved. Most are transfers to port family members. Taxing such payments can’t be justified.
“I can see more informal businesses accepting cash only, buyers won’t pay additional charges so they will carry cash to shops/markets. Sellers won’t be happy paying taxes on withdrawal. They will also opt for cash, who loses here? Government, for sure.
“This policy will rather enhance informality and it’s a complete opposite of the digitisation agenda. It will be promoting cash and not a cashless economy. It will move traffic from MoMo to cash and could bring job losses. Tax evasion in the informal sector is likely to soar.”
