The 2022 Budget: Is the E-Transaction Levy, A Burden?

By John Abbam Nyarko
Opinion The 2022 Budget: Is the E-Transaction Levy, A Burden?
NOV 18, 2021 LISTEN

Taxes are critical to the revenue generation of the state and serves as a catalyst for development. Taxes are essential in the financing of social projects and the running of the day- to-day affairs of the state. Without taxes, the government of the day can’t be able to develop the country and provide social amenities such as funding health services, education, security and research. These taxes imposed by government on persons and businesses is what affords the government to meet its budgetary demands as well as create the business environment conducive for economic growth.

The need for citizens and business to pay taxes to the state can’t be underestimated if there is to be growth and development of the state because the taxes afford government to undertake projects such as good infrastructure like roads, electricity needed to promote economic activity throughout the country as well as offer loans to businesses and individuals. Nonetheless, this does not mean government should overburden those that dutifully pay their taxes to the state.

The 2022 budget seeks to prioritize fiscal consolidation in order to ensure fiscal and debt sustainability through the reduction on borrowing, increasing domestic revenue mobilization, rationalization of expenditure and enforcement of commitment control; Youth Development and Empowerment, and Job Creation Agenda, as well as building an entrepreneurial state. These prioritizes are commendable and the government of the day needs to be supported by the citizenry by ensuring that the set targets are met and resources are judiciously used in meeting the set targets.

The 2022 Budget seeks to rake in revenues of about GH₵100.5 billion with domestic revenue alone contributing GH₵99,547 million which is a projected increase of 44% compared to the 2021 budget in terms of revenue projected. However, compensation of employees including outstanding arrears is estimated at GH₵35,841 million which is 26.1% of the total expenditure; interest payments amounting to GH₵37,447 million representing 27.3%; Capital Expenditure costing GH₵7,795 million (i.e. domestically financed expenditure) of the total GH₵16,396 million; DACF & Grants to other government units and earmarked funds at GH₵26, 828 million. These are signs of worry as a country if we are to develop and come out of unsustainable debts.

Out of this projected revenue, tax revenue is estimated to be GH₵80,168 million. Now the issue is, if government intends to spend GH₵137 billion for the year and run the economy, how do citizens help in growing the economy? It is mainly through taxation that government can run the state. The introduction of the e-Transaction Levy must be looked at economically and devoid of partisanship since the underlying rationalize is to widen the tax net.

With less than 3 million people out of over 12 million people in the labour force and paying taxes, it is only prudent for government to widen the tax net. The introduction of the e- Transaction levy affords the widening of the tax net because statistics show that more than 13 million Ghanaians have MoMo and this will afford government to rake in more revenue to close the financing gap and to reduce borrowing. The brouhaha surrounding the 1.75% could be solved when we look at the issue dispassionately and look at the need to distribute resources equitable and make taxation more inclusive to meet the financial needs and aspirations of the country, while at the same time not overburdening those who are already fulfilling their tax obligations to the state.

With the E-levy, what it means is that a daily transaction made digitally would be taxed by government at a rate of 1.75% when the transaction exceeds GH₵100 daily. So for example, those who make daily transactions whether withdrawal from your bank, ATM, bank deposits using your banking app or MoMo, won’t pay anything if the amount involved is below GH₵100.01. This means that, the vulnerable in society are exceeded and so there is nothing like tax burden on anyone whose transaction is GH₵100 and below. However, once your transaction exceeds GH₵100, the e-levy kicks in. This alone seems to discourage financial inclusion especially of the poor.

This means that, if I should withdraw GH₵120 from my bank account onto my mobile money wallet, GH₵2.10 as tax to the government for using the digital platform; if I should forward the same amount to someone I owe or a family member, I will pay another GH₵2.10. this means that to send an amount of such value to a family member, I would have to pay GH₵4.20 as charges or if I am using my banking platform, I would have to pay my banking charges for sending the money and an additional GH₵2.10 for sending. This implies that, the burden is only on the sender and this would not be borne by the recipient but, upon withdrawing such an amount, the withdrawer would also have to pay GH₵2.10 in order to withdraw the said amount.

Again, assuming I am a salaried worker who takes GH₵1500 as monthly salary (gross), after paying an income tax of about GH₵187.5 representing 12.5%, the remaining balance of GH₵1,312.5 which is being transferred to my account, my employer will pay another GH₵22.97 as 1.75% e-Levy for using the money digitally. In addition, I would have to pay another GH₵22.97 for sending that amount onto my MoMo account, and if I am to pay for a service of about GH₵200, I would have to pay GH₵3.50 as service charges to government and an additional 1% of GH₵2 as commission for using the telecom’s platform totaling GH₵5.50.

This is going to worsen the living conditions of the masses especially those who have at least 2 dependents as their purchasing power will be dwindled since the amount to have after these levies would be lesser and not forgetting the payment of VAT on everything that is being purchased. With the depreciating cedi and spikes in petroleum products, living condition is going to be worse and cost of doing business is going to soar higher for individuals and businesses.

Nonetheless, while this levy is being charged and borne by the citizenry, 16.7% of these accumulated levies would be used to support road infrastructure development and another 10% of the yields would be used for the improvement of the public transport system including the purchase of buses. This means that, citizens ought to now be more discerning and hold their elected officials accountable especially when roads are bad and the public transport system is in shambles. It is now the opportune time for citizens to learn how to hold leaders accountable in improving infrastructure and ensuring development.

Finally, the levy affords government to improve widening the tax bracket and ensuring infrastructural development while ensuring all others contribute in paying taxes and not the selected fee.

Written by:

John Abbam Nyarko

Author of “The Mystery of Human Sexuality”

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