37.6 C

E-levy: When other African countries approved it, this is what unfolded. Report by TheFourthEstate


When other African countries approved it: At the reading of the budget statement for the 2022 financial year, finance minister Ken Ofori Atta revealed the government’s plan to impose the Electronic Transactions Levy (E-levy).

“After much debate, the government has decided to put a fee on all electronic transactions in order to expand the tax net and bring the informal sector into the fold.” According to Mr. Ofori-Atta, this will be known as the “Electronic Transaction Levy” or “E-Levy.”

When other African countries approved it

Electronic transactions, such as mobile money, remittances, and bank transfers, would be taxed, according to the finance minister. He stated that a portion of the tax will go toward entrepreneurship, youth employment, and road infrastructure, among other things.

The proposed tax has sparked a flurry of media and public debate, with vehement criticism from certain sectors, particularly opposing political groups.

Many financial interest organizations have complained about the absence of discussions prior to the levy’s implementation.

On December 20, 2021, a fistfight between the two factions in parliament symbolized the apex of the legislative debates on the measure. While the majority of parliament is pushing for it, the minority has spoken out against it, holding news conferences, and staging walkouts.

The future of the E-levy, which was supposed to take effect in February 2022, is still up in the air because parliament has yet to approve it. Following the public debates and online protests, the government appears to be considering withdrawing the current bill with a 1.75 percent tax rate and replacing it with one with a 1.5 percent rate.

The government has begun what looks to be countrywide town hall meetings on the E-levy in the last several weeks, in order to educate the people and gain support for it.

In February 2022, President Nana Akufo-Addo stated that the E-levy was important to overcome the budgetary gap difficulties brought on by covid-19. Several other government officials, including the majority leader, deputy majority leader, and other top government officials, have backed the president’s statements, arguing that the E-levy is necessary.

However, Ghana is not the only country considering levying fees on electronic transactions. Many African countries have previously implemented or are contemplating implementing some type of E-levy.

Fact-Check Ghana examines how Ghana’s mobile money (Momo) tax compares to comparable levies enacted in other African nations in this article. The fact check was done by Redeemer Buatsi of The Fourth Estate

In Uganda: Bank transactions not included in tax

There are 27 million registered mobile money users in Uganda. Uganda’s government proposed a 1% charge on mobile money transactions in May 2018.

Stakeholders in the industry have expressed dissatisfaction with the lack of consultation in the policy-making process. Stakeholder consultation was “rushed,” according to a study by the Global System for Mobile Communication (GSMA), and many parties were left out of the process, including internal technocrats, opposition MPs, mobile money operators, civil society, and foreign organizations.

However, the Ugandan version of this tax excludes bank transactions. The administration cut the tax to 0.5 percent in November 2018 after substantial public uproar and resistance.

According to the GSMA research, after the tax was implemented in May 2018, total person-to-person transaction values have plummeted by more than 50%. Transactions in the industry fell by 24% in the same year. Many mobile money users, according to the report, have shifted their focus to “lower-value transactions,” such as using cash and banks.

While mobile money volumes remain ideal, the average transaction value per user has fallen, implying that individuals are restricting the number of transactions they do use mobile money, according to the GSMA. At the same time, it notes that higher value tiers, such as industrial users, have stayed with the banking system rather than using mobile money.

Cote D’Ivoire: Govt withdraws tax

By October of this year, mobile money enterprises had begun to see negative effects. People began to withdraw larger amounts from their accounts, and the number of active mobile money agents began to fall, according to mobile money carriers. Since then, the Congolese government has stated that it will reconsider the fee.

As public outrage rose, the government reached a deal with mobile money service providers to absorb the costs rather than pass them on to customers. The tax was absorbed by the service providers as a result of this arrangement.

In Malawi: Government withdraws tax

Malawi’s government likewise imposed a 1% tax in 2019, despite widespread popular uproar and protest. The general public, including civil society and other consumer organizations, complained that the tax would sabotage attempts to promote financial inclusion and discriminate against the poor. The tax was repealed by the government in October 2019.

In Congo: Government makes U-turn on tax details

The situation in the Democratic Republic of Congo is no different. The GSMA has criticized the tax policy process that led to the imposition of a mobile money tax as “a messy affair.” According to the GSMA, local civil society believes the government is primarily concerned with “imposing” policies on residents rather than discussing them.

In 2019, the government imposed a one-percentage-point tax on both mobile money and electronic bank transactions. However, as a result of the protests that accompanied the program’s implementation, the government was obliged to revise the policy to limit cash-out transactions to Mobile-Mobile Payments exclusively (MMPs).

By October of this year, mobile money enterprises had begun to see negative effects. People began to withdraw larger amounts from their accounts, and the number of active mobile money agents began to fall, according to mobile money carriers. Since then, the Congolese government has stated that it will reconsider the fee.

In Tanzania: Telcos deplore declining revenue after momo introduction

Since the government imposed a 0.1 percent fee on mobile money transactions in Tanzania, telecom firms have seen “an instantaneous difference.” Consumers are no longer utilizing mobile money services, according to the telcos, which has resulted in a significant drop in income. Hisham Hendi, the Chief Executive Officer of Vodacom, described the situation as “not good at all,” emphasizing the dire situation they are in as a result of the tax.

Click here for more breakdown of other African Countries

CountryOriginally intended percentageAfter public protests
Uganda1%– Reduced from 1% to 0.5%– 50% drop in P2P transactions– 24% drop in industry transaction
Congo1%Replaced with cashouts only
Cote d’Ivoire0.5%Withdrawn after public outcry
Malawi1%Withdrawn after public outcry
Benin5% on Momo operatorsImplemented under widespread public opposition
When other African countries approved it

The situation in Ghana

Ghanaians’ reaction to the E-levy bill was comparable to how residents in other African nations covered in this article reacted to similar tax ideas.

Although the government anticipates a 24 percent drop in transactions once the levy is fully implemented, preliminary findings published by the Bank of Ghana show that the value of mobile money transactions fell by 3.2 billion in December 2021, less than two months after the proposal to implement the E-levy was announced. Transactions fell by 3.8 percent in December compared to November, according to the report.

yentua demonstration
When other African countries approved it

It is unclear what will happen to the E-levy when it is fully implemented in Ghana, but facts from other African nations’ experiences with the levy give useful lessons for Ghana.

Widespread protests and criticism from civil society, alternative political parties, stakeholders, and the general public in various nations have resulted in modifications to the program’s execution, and in some cases, its complete termination.

The Ghanaian government is committed to enacting the bill, but a drop in consumer electronic transactions appears to be a certain conclusion.

Credit to the writer of this report, Redeemer Buatsi, is a fellow of the Next Generation Investigative Journalism Fellowship at the Media Foundation for West Africa (MFWA) and a writer for TheFourthEstate 

Wilson Tenkoranghttps://wilsontrendit.com
A Medical Biochem Student, blogger, Web Developer, and social media influencer.

Related articles

Recent articles