The decision of the government to impose a levy on electronic transactions at the current rate of 1.75% is averse to the adoption of financial innovation products, and the attempt to reduce the use of cash for business and other transactions. It will be deterrent to adopt and use financial innovations to operate a business or carry out daily transactions in the future. If the Service Providers charge 1% on transactions, it is not acceptable for the state to impose a levy of 1.75% on transactions beyond Ghc100.00 as the state is a welfare provider and protector.
The burden of this new levy will compel people to resort to the use of cash and eschew products developed for use in the financial sector. It is the desire of many states to move from the use of cash to electronic payment platforms. The Central Banks of many countries equally find it useful to complement their physical currencies with electronic ones. In line with this agenda, the Central Bank of Ghana is introducing an electronic currency called the E-Cedi to complement the physical Cedi in Ghana. The global phenomenon of testing and piloting electronic currencies for full adoption is to allow for faster and cheaper money transfers within the domestic economies and across borders without challenges. The current rate of the levy to be imposed on electronic transactions defeats the purpose of the financial innovations in the country.
States are to seek and protect the welfares of citizens through legislations and policies. Currently, the wellbeing of the citizens of the country is not sought as they are already burdened with huge transaction fees by the Service Providers and agent fees if cash is transferred to other users electronically. A mobile money user who desires to transfer Ghc500 from his or her wallet needs to pay GhC5 to the Service Provider as sender and the recipient will pay same amount for withdrawal. With the imposition of the new levy, a mobile money user will pay Ghc8.75 (1.75% of Ghc500) plus what the Service Provider charges. The impact of the incidence of the levy is huge and will be felt deeply if the amount that will be transferred is huge. That is a clear obstruction in the adoption of financial innovations in the country.
The use of physical cash in an economy is superseded in countries that plan to digitize every sector including the financial sector. Taxing electronic transactions may not be entirely wrong as it is a way of widening the tax net in order to increase revenue from taxation. The volumes of mobile money and other electronic transactions equally indicate a huge opportunity for the state to take advantage of. Yet it does not demand such huge levies to disrupt the use of payment platforms for business and other private transactions.
It will be retrogressive to impose such a levy on transactions that already attract charges and fees by the Service Provider in the case of MTN and its agents. If Vodafone Ghana, a Service Provider allows its subscribers to transfer e-cash freely on its platform, the state cannot be unsympathetic to charge electronic transactions hugely with this imposition. While it is not wrong to tax electronic transactions by the government, the rate to be imposed is unfair. So, there must be a review of the rate and the type of transactions to be levied.
The consequences of reverting to the use of cash for business and private transactions in a modern economy such as a digitized one, are dreadful that the new levy must be revised downwards by considering the impact of the new levy on businesses. There are still green areas like social media to tax.
BY Emmanuel Kwabena Wucharey
Economics Tutor, Advocate and Religion Enthusiast.