1.75 E-Levy: Can E-Transaction which is capital related be subjected to tax?

The 2022 budget statement will plummet into the annals of history as the most hotly debated in the 4th Republic.

The budget intends to broaden the tax net. That is, it hopes to rope the vastly untaxed informal sector into the taxable container.

The 'Agyenkwa’(savior)budget is the first of its kind in the 4th Republic struggling to be saved from rejection by the double-track Ghanaian Parliament led by both the NPP Majority and NDC Minority groups. Who saves the saviour?

On the floor of Parliament, there was a mouthwatering political drama that unfolded. Ghanaians witnessed the back and forth ‘rejection’ and ‘approval’ of the Savior budget on separate days. Parliamentarians appear to be reduced to common party foot-soldiers and agents of double standards.

Interestingly, a large segment of this informal group constitutes the poor masses. This group largely accesses electronic platforms particularly, MoMo for financial transactions, due to its ease and convenience.

Government communicators insist it has factored this class of people in before framing this tax policy. The government has imposed a threshold of Ghc 100 tax-free on daily transactions for E-levy. Rationalizing this, the Minister in charge of Communications and Digitalization has come out with a definition of a poor person.

A person whose daily transaction doesn't exceed the Ghc 100 threshold. Many have said, She has lost touch with realities on the grounds. Is this true?

However, the unresolved question lingers on. Is capital taxable?

E-Transaction is capital related. MoMo, Remittances, and bank transfers could be considered as capital that is transmitted employing digital outlets. It's revealing to know that, according to the tax laws, capital mustn't be subjected to tax. Profits accrued from investment from the capital are freely taxable. The income Tax Act 896-2015 amended- asserts clearly without any shred of opacity.

Against all odds, the government is battling tooth and nail to implement these taxes. These taxes are projected to rake in Ghc 6.9 billion for creating 11 million jobs, interest payments on maturing loans, infrastructure development, etc.

The rationale for introducing E-levy is informed by the astronomical volumes of Mobile Money transactions made in 2020 alone. It stands at Ghc 561 billion ($ 99 billion). Yet still, detractors of the E-levy have associated the heightened usage of MoMo transactions in 2020 with the outbreak of the global pandemic- Coronavirus.

Amidst all these heated debates, many have feared the coiling back of gains derived from the digitization agenda vigorously pushed by Vice President Dr. Buwumia. Fearfully argued by anti-E-Levy critics; is the soaring return of the age-eroding GhanaMustGo syndrome of carrying money, a scheme to double or triple tax both the poor and rich, employed and unemployed at the same rate of 1.75 percent once you overrun the threshold. Financial experts have hued and cried about a possible financial digital exclusion of the lower and middle layers of society, many detractors have hoisted red flags against the proposed usage of an undisclosed third party vehicle to monitor, mobilize and provide assurance which will cost Ghana a sum of Ghc 241 million.

Which bodies are clothed with the power to mobilize revenue in a country?

The structure of all countries regarding its public financial management is such that, the two major policies of the government(s), which are; fiscal and monetary policy are managed by two distinct institutions. Thus, the Ministry of Finance and the Central Bank, in our case, BOG.

The fiscal policy which is principally about how tax revenue is raised and spent is under the ambit of the ministry of finance bossed by its minister.

The central Bank has always had a mandate of managing the monetary policy of government.

Monetary policy rate, interest rates, inflation, reserves management are thus, some functions that this policy presents to its outfit. Albeit, these two institutions are supposed to work closely with each other to achieve the best for the economy. Is it the case that Ghanaians are being swindled by hiring a third party as captured in the 2022 Budget?

Are they helpful lessons Ghana can learn from elsewhere?

E- levy Taxation is not anything new under the Sun. Kenya amended its Financial Act in 2013 to allow for the taxation of E-transactions. This drive was inspired by the astronomic jump in the number of users from 17.4 million in June 2009 to 29.8 million in March 2013. Based on this, the Kenyan government slammed a digital service tax of 1.5 % to shore up revenue. Following the rollout of these levies and its subsequent increment, the growth rate has sharply slowed from 12.2 % in the periods 2010-2013 to 7.0 % in 2014-2017 respectively.

Similarly, in Uganda, the government slammed a 1% tax on mobile money transactions in 2018. The decision to tax received a vote of confidence from the public. The government was coerced to revise the rate to 0.5%. Of which, many Ugandans still consider problematic and deserve scrapping. As a result, it has led to a dip in Mobile money transactions in the country and a revert from a cashless economy to a cash handling economy. For instance, out of Uganda’s 43 million population,22 million are registered mobile money users with a transitional value of $20 billion. Unfortunately, a decline of 24% transactional value was recorded after the tax was set in motion. Should Ghanaians be guided in taxing E-transactions?

Are they other options than taxing E-levy?

The government appears to be caught between rock and a hard place in its bid to mobilize revenue. As the ailing economy appears to be painfully whacked by the ravaging pandemic.

Taxing Electronic transactions seems the easiest way to go. But should this be the case? Government should rather tighten the loose ends at mobilizing tax at the various Ports of entry. They are a lot of unaccounted leakages when it comes to mobilizing tax revenue. Tax the affluent, multinational corporations, cut the obnoxious tax relief granted to multinational corporations, renegotiate Ghana's stake in resources extraction in the country, and cut down on wasteful spending which is conspicuously known to the ordinary Ghanaians, etc.

By: Isaac Ananpansah