10.02.2024 Feature Article

BROADENING THE TAX NET - The Electronic Transfer Levy (E-Levy) not the way

BROADENING THE TAX NET - The Electronic Transfer Levy E-Levy not the way
10.02.2024 LISTEN

There are different types of taxes, and whenever a government needs money it introduces one tax or the other. Invariably a government can introduce indirect taxes and E-levy is not an exception. If more people decide not to use mobile money the revenue mobilization agenda of the government through the E-levy will suffer a huge setback. What the government has overlooked over the years is direct personal income tax. What all the advanced countries do is that people pay individual personal income tax. Every resident over the age of eighteen years has an obligation to file income tax. The filing of income tax does not necessary mean one has to pay tax. If one’s earnings do not meet a certain threshold, they do not have to pay anything. Quoting former President Mahama, “only about 30% of Ghanaians pay taxes”; yet he did not do much to bring the remaining 70% into the tax net. Those who pay taxes are those in the formal sector whose income goes through payroll and taxes are deducted at source. This is not, strictly speaking, paying of personal income tax. Currently only members of parliament have the obligation to file their personal income taxes, just because it is a mandatory requirement prior to filing their nomination papers as contestants to become members of parliament.

Article 94 Section (1)(c) of the 1992 constitution reads:

(1) Subject to the provisions of this article, a person shall not be qualified to be a member of

Parliament unless—
(c) he has paid all his taxes or made arrangements satisfactory to the appropriate authority for the payment of his taxes.

I believe it is only prudent that if the “Honourables” have shown the way, they should find it necessary to bring about a law or amend the existing one to compel every resident of Ghana eighteen (18) years and above to file personal income tax on a yearly basis.

Those who pay direct taxes through the payroll do not have the choice as their taxes are deducted at source. The taxes deducted at source does not reflect exactly how much the person or the worker had to pay annually. If Ghanaians are mandated to file taxes every year, then the government may justify whether the worker paid more taxes than he or she should. In this case, if the worker paid more tax during the year, then the worker is entitled for a tax refund. Some people may be paying more than they should. Single parents, for instance, may be entitled to some tax reliefs. Parents with more dependents may need a break. Filing a tax return for a Company is different from filing a personal income tax.

The government should be bold enough to tell Ghanaians that we need to file individual income taxes every year. The government needs to educate the people that we need taxes to build the nation. The government can employ thousands, of the youth and train them to assist Ghanaian residents file their taxes, thereby creating employment for the youth. Virtually nobody is paying personal income tax in Ghana. It will be difficult if not impossible to find sixteen people, one in each of the sixteen regions in Ghana who voluntarily file personal income tax. People have filed their income taxes because they went to some office, and were told to produce personal income tax, like what the prospective parliamentarians went through. It is a lot of work to bring all residents on the revenue list but that should be the way to go.

The Ghana government spent over GH¢ 500, 000,000.00 on the recent nationwide population and housing census over a span of about six weeks, which started on June 28, 2021, and ended July 18,2021. A similar nation-wide registration took place within a span of six weeks in 2020 during the new voter registration. Either a similar nationwide exercise is needed or data from the Population and Housing Census combined with that of the National Identification Authority can be used to put all residents on the tax radar.

The indirect tax E-Levy is targeted at only those who use electronic channels to conduct business, and so not everybody will contribute to that form of taxation. Ghanaians in the diaspora will end up paying the greater chunk of the E-levy taxes as they cannot starve their loved ones back in Ghana. If they however choose to find an alternative way of sending remittances, the E-Levy will miss the target revenue, and this goes for inbound transfers as well. Yet if residents will file and pay personal income taxes on a yearly basis when made mandatory, government will have more than enough to develop the country.

On the other hand, people have the perception that no matter how much taxes they pay, it would not be put into any good use. That corruption will end up swallowing a bigger chunk of the taxes. Government therefore needs to do more to fight corruption, and this will in turn motivate the citizenry to pay their taxes regularly. Again, because majority of Ghanaian residents do not pay taxes the desire to hold corrupt officials accountable is lacking. If residents pay direct taxes, they will not sit down unconcerned when corrupt officials are dissipating their hard-earned taxes.

One means of fighting corruption is by way of inculcating into the youth certain ethics, such as integrity and accountability and the love for one’s country before the youth enters into the workforce. This must be made a core subject from the Lower Primary, Secondary Schools, up to Tertiary institutions.

Written by,
Nana Osei Mensah Bonsu
(Migration and Citizenship Consultant)