The questionable electronic transfer levy (e-levy) has been reduced from 1.5% to 1%; however, it has not yet been employed. E-levy is an over-ambitious program set to easily boost the economic status of Ghana and ensure that they are independent of borrowing from foreign countries. The targets have not yet been achieved hence the reduction of the e-levy.
The government introduced e-levy as a tool to improve tax payments from many traders. The aim was to reach ordinary Ghanaians who make purchases from non-registered merchants for VAT and income tax. Huge amounts of money were spent on creating an e-levy collection platform, but the program has failed already. The reduction of e-levy from 1.5% to 1% is a good reason to eliminate it because it is failing daily.
The commissioner-General of the Ghana Revenue Authority (GRA) has not yet fully released a formal notice to implement the e-levy rate reduction. The passing of the Electronic Transfer Amendment Act, ACT 1089, 2022, led to the amendment of the original law, ACT 1075, 2022 hence the reduction of e-levy. Ken Ofori-Atta, the Minister of finance, requested the government to approve an e-levy reduction to 1% in his 2023 budget proposal. Besides, the minister recommended the elimination of the free daily ghs100 transfer for mobile money wallets and ghs20, 000 for bank transfers. The parliament did not approve the elimination of the free transfer limits during the approval of the e-levy.
The Ghanaian government initiated the e-levy program with the aim of collecting billions of money and avoiding borrowing from the IMF. The government has a plan to seek an IMF bailout because the e-levy has already failed to deliver the government’s expectations. The government predicted to collect approximately gh1.46 billion within the first two months, but the program only raised ghs93 million.
Various investors cautioned the Ghanaian government not to implement the e-levy program because a large percentage of their citizens were still facing hardships. Most nations that had employed the e-levy program were forced to abandon it because it was not working according to their expectations.
Most Ghanaians resorted to avoiding e-levy charges by avoiding transferring over ghs100 from their wallets. The unstable economic status forced many people to transfer more than ghs100 in a day using mobile money merchants and only pay the transfer charges and avoid e-levy. A large number of people record little transactions on their mobile wallets, and therefore the government does not reach their targets.
The little transactions do not allow the e-levy users to qualify for large mobile money loans. Most commercial banks have also been negatively affected, they no longer issue huge amounts of soft loans each day, and most of them have so far reported a reduction in interest returns.
Commercial banks are not in a position to invest interests from borrowed loans; hence they make little profit. Many small businesses do not qualify for bank loans following the low transaction costs on their wallets. Statistics indicate that businesses are not growing and struggle to pay taxes.
Large businesses no longer transfer huge amounts of money from their bank accounts using digital platforms; they use alternative cheques or Direct Credit services to avoid the electronic levy. Although cheques and direct credit services are not instant and take time to be processed by large businesses, businesses prefer them to evade e-levy. Besides, other businesses break down their transfers in smaller amounts over some days in case they want to use digital services.
The electronic levy seems to be creating more hardships for all people making daily transactions, especially business people and hence after the economic growth of Ghana. It is a threat to the cash-lite economy agenda initiated by the government.