The Abolishment of Ghana’s E-Levy and It’s Implications for the Economy and Mobile Money Sector
- Ghana’s government abolished the controversial e-levy, a tax on mobile money transactions
- Its repeal is celebrated by the public but raises concerns about filling the revenue gap
- Experts warn that new taxes may emerge to compensate for the lost revenue
Ghana’s new government presented its first budget on March 11, highlighting a struggling economy burdened with high debt and fiscal mismanagement. Finance Minister Cassiel Ato Forson acknowledged that the country would miss key IMF targets and announced significant spending cuts. A major point of interest for Ghanaians was whether the government would scrap the controversial electronic transfer levy (e-levy), which the minister confirmed, and parliament approved the next day.
The e-levy, introduced in 2022, taxed mobile money transactions, sparking intense public opposition. Despite promises to remove it in the 2024 elections, the e-levy had raised crucial revenue, albeit less than initially projected. It also provided valuable data to track untaxed high-income mobile money users.
Research by the International Centre for Tax and Development revealed three key takeaways:
- The e-levy became a significant source of revenue, but its actual performance fell short of expectations.
- Its true potential lay in the data it generated, aiding tax authorities in identifying non-registered taxpayers.
- The e-levy’s unpopularity stemmed from poor management of stakeholders, especially mobile money providers and the public.
The e-levy’s introduction during fiscal distress, coupled with poor communication, led to its rejection. While initially designed to raise funds, it faced strong resistance due to its regressive nature, impacting low-income mobile money users. Despite exemptions, it became less effective over time as inflation increased.
Though the e-levy’s removal is welcomed, the revenue gap it leaves behind raises concerns. Experts warn that Ghana might introduce new taxes to fill this void, potentially stirring more public discontent. Furthermore, the e-levy’s removal dismantles systems designed to improve tax administration, such as tracking high-volume users for income tax purposes.
The e-levy’s failure illustrates the importance of stakeholder engagement and trust in tax reforms, with early impressions significantly influencing their sustainability.
Authors: Max Gallien, Martin Hearson, Mary Abounabhan.
