Mon, 31 Jan 2022 Feature Article

Introduction of e-levy is ludicrously old-fashioned view of revenue generation

Introduction of e-levy is ludicrously old-fashioned view of revenue generation

I call on all Ghanaians, both home and abroad, to reject the imposition of electronic transaction tax (e-levy) by President Nana Akufo-Addo led NPP government. E-levy is like the “window tax” which was introduced by the UK government in 1696. The rich members of society were not bothered about the introduction of such a tax because they could display their wealth by flaunting their windows; while the poor ones cried out the loudest. This tax was abolished in 1851 because it didn’t help the majority of the society. E-levy is extremely clumsy like unpopular poll tax introduced in the UK by the late Mrs Margaret Thatcher. Apart from being regressive, it is more burdensome on the least well-off in society. Besides, the Government of Ghana does not offer any product or services to Ghanaians to deserve taxing the people. NPP government proposed taxes on electronic transaction is a lazy approach for any government to try to raise revenue from the downtrodden.

Mobile money has had a profound impact on the financial sector landscape in Ghana’s economy, providing traditionally unbanked populations with secure and convenient means to carry out financial transactions and furthering financial inclusion. Mobile money provides large quantities of unbanked communities comprising poor and remote rural area and supporting capital accumulation and household savings. Today, Africa is considered as the epicentre of mobile money which Asia and Latin America countries have emulate. Today the number of registered mobile money accounts being greater than that of bank accounts. Beside Mobile Network Operators (MNOs) enjoying huge fees for providing mobile money services, they are also enjoying huge deposits which they lend out for interest, more than traditional banks. It is upon these that Bank of Ghana in 2015 directed that at least 80% of interest earned by MNOs passed on to customers. Mobile money is already a vital part of daily life for most Ghanaians and we expect regulatory measures to safeguard poor Ghanaians savings. One of the most important regulatory measures identified is that in order to protect customers’ money, all Telcos need to implement mechanisms to safekeep and segregate those funds in the case of bankruptcy. Already there are potential security threats, fraudsters and attackers on mobile money transactions that needed to be addressed by the government.

Ghana has a potential workforce of over 20 million in which the government provides less than 5% employment. More than 70% of Ghanaians are either unemployed, peasant farmers or subsistence entrepreneurs; engaged in small trading or business. There is nothing like social welfare, so people have to find any means to be able to survive. While going about their daily lives, it is the mobile wallet that save them from unexpected attack from thieves and armed robbers. Almost all of them use mobile money to make payment or receive payments. These payments and receivals are not revenues, they are rather their working capitals. If it is not possible to tax business loans, how is it possible to tax someone’s working capital? Today, some corporations, companies, and medium and small enterprises pay their orders, bills and salaries through mobile money. In the advent of e-levy, such enterprises will revert to the old style of paying salaries in hands. Theoretical and practical considerations suggest that the equity concerns about e-levy is probably overstated and that, for NPP government attempts to address these concerns by such initiatives as graduated consumption taxes would be ineffective and administratively impractical.

The e-levy when passed will also affect inward foreign remittances to Ghana. Ghanaians in Diasporas and foreigners, who have interest in Ghana, remit money for their projects or investments. Apart from that, some also remit money to families, relatives and friends for their upkeep, pay school fees, medical bills, and electricity bills. Since 2001 Ghanaians abroad have been remitting massive amount of money home annually. Even in the face of the pandemic, Ghanaians abroad remitted US$4.507 billion (ca. Ghc 25 billion) by the third quarter of 2021 (i.e. 5% higher than total inward remittance to Ghana in 2020). Total inward remittances to Ghana in 2021 is higher than expected foreign direct investment (FDI) of US$3 billion. Diasporas inward remittance in 2021 makes up 6% share of Ghana’s GDP, and the 3rd highest foreign currency contributor besides cocoa and gold. Most Ghanaians are doing donkey jobs and starving themselves to save money to remit home. Already, a high percentage of Ghanaians abroad are frustrated or disappointed by families and friends who handle their businesses and projects at home. Most go through hassle before their remittances can go through. Besides, they pay excessive commissions for transferring money. If they are going to pay tax for remitting money home, I am sure most of them will stop remitting home. Alternatively, they will go back to the period when they did remittances through illegal ways.

Taxes should be designed to create social cohesion rather than conflict. Ken Ofori-Atta’s e-levy is anti-capital and it is so bad that it will destroy democratic capitalism. Taxing consumption has traditionally been thought to be inherently more regressive, because it will hit harder on the poor than the rich. It is also a recipe for economic disaster, because it will transfer money from the productive private sector to the unproductive public sector. It would be recalled that in opposition, the NPP ridiculed John Mahama led NDC government for imposing taxes on Ghanaians. In their 2016 manifesto, NPP, who tagged NDC as incompetent, promised to move the economy from taxation to production. On 2 November 2017, barely 10 months into office, Dr Mahamudu Bawumia, the Vice-President twitted “In Ghana we're moving the focus from taxation to production, taking advantage of technology”. Today, why is NPP deviating from all these promises, knowing very well it is the private that create jobs?

NPP government under President Nana Addo Dankwa Akufo Addo has borrowed the highest money in Ghana history for just 5 years in power with little to show. NPP took over the government when Ghana debt stock was Ghc 120 billion. In President Akufo-Adddo’s 5 years rule he has borrowed Ghc221 billion as at the end of November 2021, increasing Ghana debt stock to Ghc 341 billion. Besides that, he has received a total of Ghc197 billion revenue, the highest in Ghana’s history. His government also received and spent Petroleum revenue of Ghc 20 billion, and spent Ghc12 billion of Energy Sector Levies Act (ESLA), supposed to be kept for the future general. With all these gargantuan money President Akufo-Addo and Dr Bawumia have received, they could not create jobs for the youth, they could not build roads, they could not build hospitals and schools. What can they do with this e-levy which they claim will generate Ghc6.9 billion per annum?

When NPP government promised “one district-one factory” Ghanaians thought they were going to create millions of jobs for Ghanaians. Rather they were dashing money to already existed companies without any proper accountability between those companies and the government. Ghanaians have been lazy to question the government what will happened to monies dashed out to these companies? NPP government let the youth bought into their National Builders Corp (Nabco) and Planting for Food and Jobs. Today, Nabco is fiasco and PFJ is a disaster. I am of the opinion that, the NPP government and their cohorts don’t think about Ghanaians plight. They only think about themselves, hence the creation of “family and friends” government. Any good government should think of good revenue expenditure rather than excessive and reckless expenses. Our President have and continues to misuse State’s money like money is pulled out freely from the Atlantic Ocean. President Akufo-Addo is still not perturbed by his lavish travel expenses. And his appointees are bloating any project or contract they get hands on.

I call on good Ghanaians not to suffer any unjust taxation and oppression by this regime. E-levy is not well thought of and it is a lazy mindset.

Written by;

Lewis Kwame Addo


[email protected]

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