A former Board Chair of the Ghana Revenue Authority (GRA), Prof. Stephen Adei is the latest person to publicly support government’s controversial Electronic Transaction Levy (E-Levy).
According to him, the tax policy is a more feasible alternative to generate revenue and make up for shortfalls, rather than opposers’ recommendation for the country to seek financial support from the International Monetary Fund (IMF)
He insisted that the panacea to resuscitate the economy is to use a “homegrown” vehicle like the proposed E-levy.
“I don’t support us going to the IMF now. This is the time we have to stop this NPP and NDC thing and get [going].
“I don’t think we need to go to the IMF because there are two things that will happen about policy prescriptions and the amount of money we will get because they won’t give us more than half a billion dollars which is peanut and less than half of what E-levy will give us. So we need policy direction changes and actions, and we can do it domestically,” he said in an interview with Accra-based Class FM.
The former Rector of the Ghana Institute of Management and Public Administration (GIMPA), noted that the amount anticipated from the E-levy is enough to seal some revenue loopholes, and must not be allowed to elude the government.
“I can see that they would be getting about ¢5 billion. GH¢5 billion is still a big amount; that’s almost $1 billion.
“Even if they are not likely to get what has been projected given the situation we are in now, I believe that the ‘MoMo’ must be taxed and, at least, it will help bring in ¢5 billion to plug the hole,” he stated.
Prof Adei explained that funds generated from E-levy’s mobilisation are low compared to other tax policies that are costly in accumulation.
“Immediately, we must find low-hanging fruits and the ‘MoMo’ [tax] is one of the low-hanging ones. In a developing country, one of the biggest challenges in taxation is that if the cost of collection, sometimes, exceeds what you’ll get, then you must, as well, let it go.
“With the MoMo tax, however, the cost of collection is almost zero,” he opined.
Finance Minister Ken Ofori-Atta, presenting the 2022 budget on Wednesday, November 17, announced that the government intends to introduce an electronic transaction levy (e-levy).
The levy, he revealed, is being introduced to “widen the tax net and rope in the informal sector”. This followed a previous announcement that the government intends to halt the collection of road tolls.
The proposed levy, which was expected to come into effect in January, 2022, is a charge of 1.75% on the value of electronic transactions. It covers mobile money payments, bank transfers, merchant payments, and inward remittances.
There is an exemption for transactions up to GH¢100 per day.
Explaining the government’s decision, the Finance Minister revealed that the total digital transactions for 2020 were estimated to be over GH¢500 billion (about $81 billion) compared to GH¢78 billion ($12.5 billion) in 2016. Thus, the need to widen the tax net to include the informal sector.
Although the government has argued that it is an innovative way to generate revenue, scores of citizens and stakeholders have expressed varied sentiments on its appropriateness with many standing firmly against it.
Even though others have argued in support of the levy, a section of the populace believe that the 1.75% e-levy is an insensitive tax policy that will deepen the already prevailing hardship in the country.