We argued that e-levy was double taxation, Bawumia’s promise to scrap it is welcoming – Economist

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The e-levy that was introduced by the Akufo-Addo administration was a double taxation imposed on the people of Ghana, therefore, the promise by Vice President Dr Mahamudu Bawumia to scrap it if he wins this year’s elections is welcoming news, an economist and Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye, has said.

Dr Bawumia has stated categorically that he would abolish the tax on electronic financial transactions, e-levy, if elected President of Ghana. The controversial tax was introduced in 2022, and prior to the introduction, Vice President Bawumia had declared his opposition to levies on electronic financial transactions in an interview.

Delivering his first major address to the nation after his election as NPP flagbearer, during which he gave broad policy outlines of a Bawumia Presidency, Dr. Bawumia minced no words in declaring his opposition to taxes on electronic financial transactions, declaring that he would abolish e-levy as President.

Dr Bawumia added that his bid for a Digital and Cashless Ghana would be significantly boosted if e-levy is abolished.

“To move towards a cashless economy, however, we have to encourage the population to use electronic channels payment. To accomplish this, there will be no taxes on digital payments under my administration. The e-levy will therefore, be abolished,” he declared at the UPSA auditorium on February 7.

Dr. Bawumia also announced that as part of a new tax regime by his government, he will also abolish the emission tax, tax on betting as well as the proposed 15% VAT on electricity tariffs, if it is in existence by January 2025.

He also announced that his government would introduce what he described as a friendly, flat tax regime for Ghana, which will boost individuals and businesses, particularly small and medium-scale enterprises (SMEs).

“My administration will introduce a very simple, citizen and business-friendly flat tax regime. A flat tax of a percentage of income for individuals and SMEs, which constitute 98% of all businesses in Ghana, with appropriate exemption thresholds set to protect the poor,” Dr. Bawumia indicated.

In his assessment of the address delivered by the Vice President, Dr John Kwakye said “in a statement that “Dr. Bawumia bemoaned Ghana’s low revenue effort, attributing it to the narrow tax net, tax loopholes and the complex tax system, among others. He promised to streamline the tax system to increase collections, including by simplifying corporate tax and VAT, introducing a flat tax rate and promoting digitization of the tax filing system.

“As we saw numerous taxes being introduced by the Government, some of us wondered whether it was this same Government that had promised to move policy “from taxation to production,” a promise that was championed by Dr. Bawumia.

“As economists, we are all aware of the Laffer Curve that suggests that governments can collect taxes only up to a point when noncompliance will set in, leading to diminishing tax collections. By proposing to take the above measures to simplify and reduce taxes, it is obvious that Dr. Bawumia was not in charge of Government’s tax policy, which was also partly being driven by the IMF, and that his thinking is very much in line with orthodox economics. Dr. Bawumia also promised not to tax digital payments, and in, particular, to scrap the e-levy.

“This action is also to be commended and welcomed. Some of us have long argued that the e-levy amounted to multiple taxation and that it was not a justified tax to the extent that it was levied on “financial transfers” rather than “financial transactions.” Taxes should only be
charged on incomes and transactions. Therefore, while I do not have any problem with the
levying of e-commerce, which are transactions, I have a problem with levying money transfers, which are not transactions.”