Government is set to redesign the Electronic Transfer Levy (E-levy) with the aim of improving revenue mobilization and administrative efficiency.
The tax handle has, as at May 2023, raked in more than GHC800,000,000.00, but government holds the view that this can be improved.
This view is expressed in Government’s Medium Term Revenue Strategy plan prepared by the Ministry of Finance in September, 2023. The levy which was introduced in May 2022, has already undergone some changes.
It was structured as a 1.5% charge on all electronic and mobile money transactions exceeding ¢100 per day. The aim was to bring a lot more Ghanaians into the tax bracket including those in the informal sector of the economy.
Some Ghanaians raised concerns about the high rate having dire consequences for their limited funds. There were also suggestions that some persons were avoiding mobile money transactions and opting for cash transactions. This sparked fears of the nation eroding the gains made in the digitalization drive. These concerns caused a reduction of the rate to 1%, but it is unclear what more specific changes will be introduced by government.
Government in the document expresses concern about the fact that direct taxes have contributed more to total tax revenue than indirect taxes and international trade taxes in the last 10 years. It adds that persons in the informal sector have not been effectively brought within the tax basket.
“To date, there has not been an effective mechanism to ensure that persons in the informal sector pay their share of taxes, especially income taxes. There are no simplified tax returns for small and medium enterprises, and the costs of tax compliance for such businesses tend to be onerous. Several industries and companies – both small and large – within specified sub-sectors have enjoyed concessionary income tax rates since the 1990s and mid-2000s in a bid to promote investment and encourage domestic production.
The corresponding economic impact, including increases in exports, foreign exchange reserves, and employment, are however, not equally apparent in these incentivized sub-sectors. Inflation over the years has also significantly compromised the progressivity of the individual tax rates and the disposal income of the average Ghanaian,” parts of the document read.
To fix this issue, the government wants to review tax types that do not reflect current market realities, such as stamp duty, income tax stamp and vehicle income tax. It also wants to re-design some policies, such as the electronic transfer levy as well as introduce new tax handles to tackle income tax matters arising out of the digital economy space.
On the indirect tax front, government wants to introduce an automatic adjustment formula for specific tax rates, review VAT exemptions to make them more efficient and less distortionary and review the VAT and imposition of the levies to make them more supportive of industry.
