Gov’t unveils ambitious overhaul of E-Levy as part of revenue strategy

In a noteworthy development, the Ghanaian government has unveiled an ambitious plan aimed at a comprehensive overhaul of the Electronic Transfer Levy, as part of its Medium Term Revenue Strategy. This strategic move underscores a dedicated effort to revamp and optimize the taxation policy, with a keen eye on enhancing efficiency and effectiveness in revenue collection.

The Electronic Transfer Levy, colloquially known as the e-levy, was initially introduced in May 2022 and drew widespread criticism for imposing a 1.5% charge on all electronic and mobile money transactions exceeding ¢100 per day. The policy was primarily designed to augment government revenues by extracting larger tax contributions from the informal sector of Ghana’s economy.

However, in a recalibration of the tax policy in January 2023, the government opted to reduce the levy rate from 1.5% to 1%, responding to public sentiment.

Notably, the levy’s unique feature, an exemption threshold for transactions below ¢100 per day, is currently in place but faces erosion due to inflation over the past year. This threshold’s future remains uncertain as the government moves forward with its reforms.

The impact of the e-levy on Ghana’s public finances, its populace, and the usage of mobile money has been a subject of intense debate, often lacking empirical foundations. This comprehensive redesign of the Electronic Transfer Levy signifies a forward-thinking approach to taxation in the digital age, in alignment with the broader governmental strategy of modernizing revenue collection while striving for equitable distribution of the tax burden across various sectors of the economy.

In addition to the reforms related to the e-levy, the Medium Term Revenue Strategy outlines several other critical measures. Firstly, a plan to expand the withholding tax regime to cover various tax types aims to enhance taxpayer identification, streamline tax collection, and simplify filing processes, particularly for incomes within the informal sector.

Secondly, the strategy encompasses initiatives to streamline tax returns and scrutinize the modified taxation system, with the overarching goal of reducing tax avoidance and promoting voluntary compliance.

Furthermore, a vital aspect of this strategy involves a comprehensive review of outdated tax categories, including stamp duty, income tax stamp, and vehicle income tax, with a primary focus on aligning them with the ever-evolving dynamics of the market.

Additionally, the strategy seeks to bolster the taxation of rental income, ensuring a fairer contribution from this sector.

Lastly, a notable inclusion in the plan involves the implementation of taxation on Gross Gaming Revenue (GGR) for industry players and the introduction of withholding tax on winnings. This represents a significant step towards a more comprehensive and equitable tax structure.

As Ghana charts its course towards fiscal reform, these proposed measures hold the potential to reshape the nation’s revenue landscape and foster a more resilient and equitable economic environment. The outcome of these reforms will be closely watched by both domestic and international observers, with implications reaching far beyond the borders of the West African nation.