Implementation of E-Levy to cause remittances to fall
The introduction of the electronic transaction levy in the 2022 budget read by the finance minister has raised a lot of concerns from the public particularly from economic analysts.
While some economic experts are of the view that the levy should be reduced, others are of the view that it should be dropped.
Dr. Sam Korankye, an economist, while addressing the newly inducted economists at the Annual Economist Conference in Accra said the E-levy is a bad one and retrogressive to the development of the country’s financial sector.
Adding that remittances in the country is likely to drop significantly if the tax on electronic transaction and inward remittances remains in the budget for the 2022 financial year.
The tax, he further noted, will also result in the high cost of remittance into the country, an impact that will be against the sustainable development goal of financial inclusion.
“Taxing inward remittance flow is a bad idea since remittance are usually sent to poor families or migrants. The tax will be born ultimately by them and therefore is likely to be highly regressive. A tax on remittance will raise cost of remittance in direct contravention to the G20 commitment and the sustainable development goal of reducing remittance cost and increasing financial inclusion,” he said.
“Poor migrant workers tend to be highly sensitive in the cost of remittance. A tax on remittance will drive these flows to unregulated informal channels and we’ve been there before. This is likely to reduce the tax revenue, increase the cost of tax administration and encourage informal channel of money inflows. Estimate suggest that revenue raised from tax or remittances will be small relative to the revenue base of the country,” he added.
Remittance flow to Ghana according to the World Bank, increased slightly to $3.6 billion last year despite the impact of the Covid-19 pandemic.
The World Bank notes that the $3.6 billion remittances recorded for 2020, represent a 5 percentage points increment to that of remittance inflows recorded for 2019.
In the Sub-Saharan Africa region, Ghana was ranked second behind Nigeria in remittance inflows for last year despite a 27.7 percentage points decline in remittance inflows to Nigeria.
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Remittance flow to Ghana, other low and middle-income countries reach $589 billion in 2021
Remittances to Ghana and other low and middle-income countries per new data released by the World Bank Group, averaged 7.3% to reach $589 billion in 2021
The World Bank notes the return to growth of remittance flow is more robust than earlier estimates and follows the resilience of flows in 2020 when remittances declined by only 1.7 percent despite a severe global recession due to COVID-19.
According to the World Bank, remittance flows to low- and middle-income countries for a second consecutive year are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA).
This underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants’ countries of origin.
Remittance flow to Sub-Sahara Africa
Remittance inflows to Sub-Saharan Africa returned to growth in 2021, increasing by 6.2 percent to $45 billion. Nigeria, the region’s largest recipient, is experiencing a moderate rebound in remittance flows, in part due to the increasing influence of policies intended to channel inflows through the banking system.
Countries where the value of remittance inflows as a share of GDP is significant include the Gambia (33.8 percent), Lesotho (23.5 percent), Cabo Verde (15.6 percent) and Comoros (12.3 percent).
In 2022, remittance inflows are projected to grow by 5.5 percent due to continued economic recovery in Europe and the United States. Remittance costs: Costs averaged 8 percent in the first quarter of 2021, down from 8.9 percent a year ago.
Although intra-regional migration makes up more than 70 percent of cross-border migration, costs are high due to small quantities of formal flows and utilization of black-market exchange rates.
