Research by the Centre for Economics, Finance, and Inequality Studies (CEFIS), has shown that many Ghanaians are avoiding the payment of tax on electronic transactions above GH¢100 because of the 1.5 per cent charge.
This is making room for Mobile Money (MoMo) merchants (whose number has been increasing) to “milk” the government of expected revenue from the Electronic Transactions Levy (E-levy) – as merchants negotiate with customers for a fee, making customers avoid the payment of tax.
The 2021 Bank of Ghana (BoG) Payment Systems Oversight Annual Report noted that the total number of active mobile money customers increased by 2.4 per cent year-on-year, with active mobile money agents growing by 29 per cent year-on-year.
Some MoMo merchants in Accra who spoke on anonymity with the Ghana News Agency as well as mobile money users admitted going into such agreement to avoid paying taxes, especially on transactions amounting to GH¢1,000 and above.
The merchants said some people deposit money to recipients through them to avoid the payment of the E-levy, while others allowed cash-out from their end instead of transferring the money to the recipients directly and paying the corresponding tax.
The Electronic Transactions Levy Act, which was introduced in May 2020, comes with a 1.5 per cent charge on transactions exceeding a cumulative GH¢100 per day in addition to charges by service providers (MTN and AirtelTigo).
The tax handle is to shore up Government’s revenue, which the study noted a reduction of the rate from the 1.5 per cent to 0.5 per cent would make existing active users patroniseMoMo transactions.
The revenue from the E-levy is to support the Government’s YouStart entrepreneurship programme, digital infrastructure, and cybersecurity, and increase Ghana’s tax-to-GDP ratio to 20 per cent by 2024 for national development.
CEFIS observed that “in many commercial transactions, the parties involved negotiate based on a ‘gentleman’s agreement’, where the sender deposits cash into the wallet of the receiver through a MoMo merchant account to avoid the payment of its corresponding e-levy charge.”
Prof. Anthony Amoah, a co-author of the study, who spoke to GNA, said: “We observed that consumers have created a gateway to avoid the tax, giving that tax avoidance is not criminal.”
He said that the strategy of using the e-levy as a conduit to get the informal sector to contribute to national revenue had failed, as the informal sector, the most active group, was exploiting the loopholes.
“Those who do transactions like GH¢50 and GH¢100 are already exempted from paying the tax but those who pay above the cumulative GH¢100 are avoiding it and it’s actually those who are doing bigger transactions that do it more,” he said.
Prof. Amoah added that: “This means that it is the agent that benefits and not the government, and we found that the number of agents is going up because it’s more profitable to be in that business, but it is very discouraging to the government.”
“If the government reduces the rate from the 1.5 per cent to 0.5 per cent and people don’t feel the impact, then you’re going to rake them in,” Prof. Amoah, who is a Development Economist, said.
The evidence from the simulations suggested that if the levy was revised to 0.5 per cent, and 54 per cent of the existing active users patronisedMoMo transactions, the expected revenue for 2022 would be GH¢2, 640,600,000.81.
That revenue would rise by 21.4 per cent to yield GH¢3,205,688,401.01 in 2023, and in 2024, reach GH¢3,635,234,306.60, and by 2025, the projected revenue from e-levy would reach GH¢4,043,980,051.74. —GNA