Private sector consumption to decrease this year following e-levy implementation – Fitch Solutions
Research firm, Fitch Solutions, has indicated that private consumption will decrease this year due to the implementation of the e-levy with business sentiments remaining fragile.
According to its Sub-Saharan Africa update, Ghana’s Purchasing Manager’s Index – which determines the direction of economic trends in the manufacturing and service sectors – declined for the first time in seven months due to the rising prices of some goods and services.
Analyst with the Sub-Saharan Africa Country Risk Team at Fitch Solutions, Ben Weaver, said the high prices of goods are impacting on consumption and the private sector.
“We are already experiencing the impact of high prices on the private sector amid elevated prices of input and concerns of over supply chains”.
“We expect business sentiments to remain fragile in the coming quarters. Moreover, we expect the introduction of the 1.5% E-Levy tax to create further headwinds on domestic demands with a direct effect on mobile money, which is actively used by 40% of Ghanaians age 15 and older”.
“Against this background, we expect private consumption growth to decelerate in 2022”, Mr. Weaver said.
Despite this, foreign investments are expected to rise including new investments in gold production by GoldFields and AngloGold Ashanti.
“Rising foreign investment will also prevent a sharp slowdown in the economy. We further expect strong growth in fixed investments at 5% in 2022 which was above the 5 year pre-pandemic average of 2.7%”, Mr. Weaver noted.
“While fixed investment will accelerate as projects delayed by the COVID-19 pandemic resume and higher commodity prices boost foreign interest in the country’s abundant natural resources, it said this will not be sufficient to offset the weakness in other components”, he concluded.
MoMo transactions fall by GHS 10bn over impending E-levy implementation
Total value of mobile money transactions over a three months period – November 2021 to December 2021 – has declined by GHS 10bn.
This is per data made available by the Central Bank in its Summary of Economic and Financial Data published in March 2022.
The platform, which is the largest payment system network in the country, saw its transaction value decline to GHS 76.2 billion in January 2022 from the GHS 86.1billion recorded in November 2021, indicating a drop of GHS 9.9 billion.
Besides the drop in value on the platform, the total number of transactions also declined as it saw a 24 million drop in January 2022 from November 2021.
The number of active agents also saw a decline of 7,000 within the same period, while active mobile money accounts also decreased by 600,000 in the review period.
GRA lists entities responsible for charging E-Levy
Head of Compliance, Domestic Tax Revenue Unit at the Ghana Revenue Authority (GRA), Victor Yao Akogo, has listed entities responsible for deducting the yet-to-be-implemented Electronic Transfer Levy (E-Levy) on electronic transactions.
According to Mr Yao Akogo, entities designated to make the E-Levy deductions are prepping themselves to ensure that the new tax policy is implemented smoothly on May 1, 2022.
Speaking in an interview on Sunday, Mr Yao Akogo listed the entities as follows;
- Electronic Money Issuers such as MTN, Vodafone Cash, AirtelTigo, Zeepay, and G-Money.
- Payment Service Providers (PSPs) such as E-transact.
- Banks [Charges applicable on the digital system]
- The Specialised Deposit-Taking Institutions (SDIs) Eg: Rural and Community Banks
Throwing more light on the topic, a Principal Revenue Officer and Head of the Project Management Unit said the Authority, Isaac Kobina Amoako, said the aforementioned entities will serve as intermediaries.
According to him, the institutions, after the deduction, will transfer the funds to the consolidated account of the GRA within 24 hours.
“Once the funds are deducted by the charging entities, we require that within 24 hours, they remit that amount to the Bank of Ghana electronically,” he stated.
