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The Pros And Cons Of E-Levy If Approved

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The pros and cons of e-levy if approved.

Some governments in Sub-Saharan Africa have attempted to impose e-levy rates on digital transactions, with some succeeding and others failing.

In Uganda, a tax on electronic transactions drew a lot of criticism and was subsequently repealed.

At the time, the UNCDF performed a study on selected Ugandan users to analyze the implications of the levy on consumer behavior and digital financial inclusion, giving preliminary evidence of detrimental consequences on disadvantaged groups.

The Pros And Cons Of E-Levy If Approved
The Pros And Cons Of E-Levy If Approved

In Nigeria, on the other hand, the World Bank estimates that the electronic money transfer charge will generate N 462 billion (US$ 1.13 billion) in stable revenue in 2021.

The proposed e-levy tax in Ghana is based on the country’s success with mobile money over the last few years.

In Ghana, mobile money has made significant progress in expanding access to digital financial services and closing the financial inclusion gap.

By November 2021, Ghana had 47.3 million registered users, 18.4 active users, and mobile money transactions of over GHs 80 billion (US$13 billion).

It’s no surprise that Ghana has become one of Africa’s fastest-growing mobile money markets, with registered accounts more than doubling from 2012 to 2017.

The Pros And Cons Of E-Levy If Approved
The Pros And Cons Of E-Levy If Approved

On the one hand, the e-levy is predicted to raise tax revenue for the government by GHs 6.9 billion (US$1.1 billion), allowing them to lower the budget deficit.

Due to Ghana’s huge informal sector, successive governments have failed to adopt a comprehensive tax framework.

Today, mobile money has given a platform for bringing the informal sector into official financial services, as well as a mechanism for enacting a tax regime that covers practically all of the country’s adult people.

The potential money will be used to fund the ‘YouStart‘ Initiative, road construction, the growth of Ghana’s digital space, and especially the development of basic education in the country, among other things.

For example, the YouStart project would be a vehicle to help young entrepreneurs acquire access to finance, technical skills, training, and mentoring in order to start their own enterprises, which would go a long way toward solving the country’s youth employment problem.

In addition, the government has promised a tax exemption for transactions under GHs 100 per day (US$ 16) to ensure that vulnerable groups can continue to use digital transactions without incurring additional costs.

Industry stakeholders, on the other hand, are concerned about the e-potential levy’s impact on the country’s current digitization agenda.

The e-levy, according to several stakeholders, will reverse all of the gains obtained with Digital Financial Services, causing clients to return to cash.

According to the government’s estimate of the e-impact, levy’s 24 percent of customers will abandon digital services during the first few months, but they will eventually return since the benefits exceed the drawbacks.

In contrast, according to a UNCDF survey on the impact of the mobile money tax in Uganda, 38% of respondents used mobile money less after the tax was implemented.

In comparison to higher income categories, low-income customers were disproportionately affected by the withdrawal tax.

The Pros And Cons Of E-Levy If Approved
The Pros And Cons Of E-Levy If Approved

Around 57.4 percent of high-income respondents began utilizing agent banking as a direct result of the levy, compared to 11.1 percent of low-income respondents who were unable to access alternatives where a similar charge was not imposed.

Overall, once the tax was implemented, there was a sharp drop in transaction value of over 50%, with higher-income users who were more prone to engage in higher-value transactions migrating away from mobile money.

Martin Somado-Hemazro
  1. I am a digital marketer with extensive success and experience, I possess a wide range of knowledge and talents that will allow me to contribute toward the success of any brand that I associate myself with.

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