The E- Levy & Matters Arising: Is our rage justified or are we at our nagging best?

Following the reading of Ghana’s 2022 budget statement, there have been numerous debates about the proposed E-levy and a large section of the populace has since registered its displeasure at it.

The Government has however assumed a seemingly uncompromising posture towards the implementation of the proposed E-Levy. Many have argued that the government’s posture smacks of desperation. Of course, without giving it much thought, one would come to the realisation that this appears to be an all or nothing kind of battle for the government. What we are experiencing is the natural reaction of a state bedeviled with self-imposed penury. It is a result of continuous fiscal irresponsibility and an ill-inspired manner of living. This piece discusses the proposed levy in the light of our prevailing tax policy, our economic state as a nation, and hysterically, our vigorous pursuit of the ‘kamikaze’ button in our digital inclusion agenda.

E-Levy- What is it?

The E-Levy is a proposed tax on specified electronic transactions. According to the E-levy Bill, the levy is proposed at a rate of 1.75percent on the value of mobile money transactions between mobile money accounts on the same electronic money issuer (EMI), mobile money transactions between mobile money accounts on different EMIs, transfers from bank accounts to mobile money accounts, transfers from mobile money accounts to bank accounts and bank transfers on digital platforms or applications originating from a bank account belonging to an individual to another individual. While it has recently emerged that the government might be willing to adjust the rate of the levy downwards in response to pressure from the minority in parliament and the general public, one can only be certain of the percentage of tax when the enabling legislation is passed.

Tax Policy Considerations

According to the latest statistics published by the OECD, Ghana’s Tax-GDP-Ratio currently stands at 13.5 per cent. In less sophisticated language, this means that the amount of tax collected in Ghana, expressed as a percentage of the total value of goods and services produced in the country stands at 13.5 per cent, below the African average rate of 16.6 percent. A relatively higher tax-GDP ratio signals a robust internal revenue generation machinery whereas a lower percentage indicates the exact opposite. While I admit that our tax-GDP ratio should be higher to support our economic transformation dreams, any approach that sacrifices or even ignores other important signals of economic growth may lead us to the proverbially misleading glitter.

In the just-ended fiscal year, the Ghana Revenue Authority (GRA) has itself announced that it met and surpassed its revenue mobilisation target. In an economy straddled with the ‘post Covid-19’ problems, this achievement must be commended. The actual target for 2021 was GHS 57.055 billion.

The GRA ended up collecting GHS 57.32 billion. What makes this achievement even more spectacular is that the target for the year was not adjusted downwards during the mid-year review as has become customary over the last couple of years. Additionally, the revenue generation resulted in a 26.3 per cent growth over the previous year’s revenue, the highest annual growth rate in a decade.2 Clearly, it appears we have the men to collect the taxes. When one looks at the breakdown of the revenue mobilisation according to the tax types, it reveals an interesting fact.

To illustrate this point better, let us consider these statistics; our Domestic Direct Taxes accounted for 46.1 per cent of the revenue generated. Domestic Indirect Taxes made up for 23.8 per cent and Customs and International Trade Taxes accounted for 28.1 per cent of our revenue. The biggest contributor to our tax revenue is direct taxation.

Ironically, in a year where the GRA reminds us of its stellar achievements that outshine all other achievements over the last decade, it is shocking to find out that this much tax was collected from a tax paying population that does not even constitute up to 10 per cent of the population.

According to the recent population and housing census, Ghana’s tax penetration rate stands at less than 10 per cent. This was also reported in the budget statement. By implication, less than 10 per cent of the population contributes to Ghana’s direct domestic revenue generation. It is amazing that such a fraction of Ghanaians is responsible for the marvelous performance of the GRA this year, as touted by the Authority itself. One can only imagine how much more taxes could be collected by just doubling the tax penetration figure.

It is safe to conclude here that an increase in the number of direct taxpayers would significantly impact our revenue mobilisation agenda. Logically, one would wonder how we can achieve such an increase in the number of registered taxpayers in such a short space of time. Another anticipated comment would be the observation that the introduction of the E-Levy would expand the tax base and invariably achieve the same purpose.

The answer to the first preempted question is fairly straightforward. Last year, the GRA announced that they were phasing out individual Tax Identification Numbers (TINs) and replacing these with the Ghana Card ID number. According to the Authority, the number of people registered by the National Identification Authority (NIA) as part of the mass registration exercise as at October 5, 2021 was over 15 million, representing 84.3% of Ghanaians over the age of fifteen (15).

In the past year, so much progress has been made with the integration of the Ghana Card into essential parts of the economy. As it stands, one cannot start a business without a Ghana Card. Recently, the Bank of Ghana announced that effective July, 2022, the Ghana Card will be the only allowable ID for transacting business with Banks and Specialised Deposit-Taking Institutions. These efforts have invariably widened the tax net in such a short time.

The Commissioner -General of the GRA himself has stated that this move will enable organisations share important data and rope in eligible taxpayers, especially in the informal sector. To situate this in the context of the figures, according to the 2022 budget statement, Ghana’s population stands at 30.8 million people with 42.8% belonging to the adult population. Of this number, only 2,364,348 people, representing less than 10% of the total population, were registered as taxpayers as at August 2022. Also, of this number, only 2,364,348 people, representing less than 10% of the total population, were registered as taxpayers as at August 2021. Again, only 45,109 entities are registered as Corporate taxpayers, while 54,364 persons are registered as self-employed taxpayers at the GRA.

Obviously, these statistics did not factor in the mass Ghana Card Registration and the automatic expansion of the tax net as a consequence of the policies and decisions that have followed the mass registration. Considering these same figures in the aftermath of a complete migration from traditional TINs to the Ghana Card ID number, we will be looking at potentially quadrupling the figures for corporate and individual taxpayers in the books of the Revenue Authority. The point being made here is that the tax net has already been expanded significantly with the migration from traditional TINs to the Ghana Card ID Number, and it is only going to get better with time as complete integration is pursued.

For a Revenue Authority whose men appear to have been on their best performance in a decade, collecting over GHS 26 million from a narrow net of direct corporate and individual taxpayers, collecting an excess GHS 6.9 billion from a significantly wider tax net should be the easiest task. If we pursue increased revenue mobilisation in this manner, we will be killing two birds with one stone; we will be effectively distributing the tax burden proportionally and advancing equity of tax collection as well as preventing the almost tragic consequences of this proposed E-levy.

E-Levy; the Antithesis of Digital Inclusion

Ghana’s digital payments ecosystem has recorded significant growth over the last couple of years. The ease and flexibility associated with these payments make patronage of mobile money and other payment services quite organic. According to the Bank of Ghana, the value of digital transactions in Ghana grew by 120% from February 2020 to February 2021, indicating a threefold increase relative to the 40% increase from February 2019 to February 2020.

The total value of digital transactions for 2020 was estimated to be over GHS 500 billion compared to GHS 257 billion in 2019 and GHS 78 billion in 2016. As at October 2021, there were 18.4 million active mobile money accounts, more than 7 times the number of registered tax payers. This is great news for a country poised to advance digital inclusion and promote a cash-lite economy. What a cashless economy does for us is to reduce the Central Bank’s cost of cash production and transportation as a huge section of the economy will thrive on alternative payment channels.

It is thus clear that, contrary to pedestrian comments that seem to suggest that the only advantage of a cashless economy is increased convenience, real economic considerations exist for the commitment of emerging and developed economies to the cash-lite agenda. There are also immense benefits for revenue generation efforts. Last year, the GRA migrated to a completely digital payment infrastructure. The feat of surpassing last year’s revenue mobilisation target has been partly attributed to this transition by the GRA. One would then wonder why the government would risk losing a significant number of patrons of digital payment services by introducing a levy which has been proven elsewhere to cause a sharp decline in patronage of alternative payment methods.

In Uganda for instance, a tax on mobile money services was reduced from the initial rate of 1% to 0.5% following public outcry. The effect of this tax was nevertheless felt when months later, the value of transactions dropped by a whopping 24%.6 Further research suggests that although at face value, the idea of the E-levy might seem like a quick fix to broadening the tax net, the long term effects may significantly erode our tax revenue. A certain study by Njuguna Ndungú on the effects of a similar tax on the digital inclusion landscape of Kenya makes the finding that increased taxation on mobile phone-based transactions may not expand the tax base, but, rather, may result in less and less tax revenue in the future.

In other words, a higher tax rate on low-level retail electronic transactions, which come from low-income earners that are sensitive to transaction costs, may discourage the use of mobile phone payments. These taxes are targeting mobile transactions because of their high volume, but, in reality, the value per transaction is so low that even a low tax has a disproportionate effect on the cost.

Although the proposed Bill suggests that the levy will not apply on transactions that do not exceed a cumulative value of GHS 100 in a day, it is nevertheless a regressive tax as the value of GHS 100 in today’s economy is so insignificant that most transactions would exceed the threshold. The tax is regressive because it imposes the same amount on Mobile Money payments between two individuals transacting in a Ghanaian market place like the Dome market as it does to high net worth corporations transferring funds between and among themselves using a digital channel.

While these two corporations might be willing to bear the extra cost for convenience, the trader and customer stationed at Dome would rather revert to cash transactions to save the least penny. In what the economists will term as inelastic demand, the patronage of these alternative payment platforms will experience a sharp decline as a result of the increased costs associated with digital payment transactions. Typically, this is easier in our environment because of the alternative, cash payments. In sum, patronage of digital payment systems will drop significantly, affecting the digital payments ecosystem.

Other Issues

It must be noted that the government’s revenue generation efforts will be significantly threatened. What the government fails to realise is the fact that even though the payment of taxes and other government charges have been apparently excluded from the ambit of application of the levy, that would be inconsequential to the decline in the payment of taxes through digital platforms. People will simply not utilise those platforms which implies that payment of taxes, through these platforms would become secondary and needless to many of these taxpayers.

The proposed levy also exposes taxpayers to economic double taxation. Firstly, the base of this tax is not income, it merely identifies money being transferred and places a tax on that amount. The money involved may be money which has already been taxed at another level. Let us consider the scenario where Akua buys a meal at Santoku. Her bill is GHS 200 and includes all statutory levies (VAT, Covid-19 Levy, Tourism Levy etc.). She chooses to pay via electronic means, then the government lays claim to an extra portion of her money. In essence, same amount of money has been taxed twice.

It could even get more complex if she is paying from a card linked to her salary account that has already been subject to income tax. This scenario explains why most commentators regard the levy as a needless burden on the already burdened citizenry. The million-dollar question still remains unanswered: Why put already compliant taxpayers through a layer of extra burden when millions of Ghanaians who could be paying direct taxes continue to enjoy a holiday?


The author is of the firm conviction that the E-levy is a lazy approach to raising money to service our budget. For a price of GHS 6.9 billion, which at this point appears unrealistic due to circumstances like delay in the passage of the Act and possible reduction in the rate of the tax, it is a very cheap altar on which to sacrifice the gains made in our digital inclusion agenda and the promotion of the cash-lite agenda.

As demonstrated, more money could be raised for the government expenditure by simply putting our ‘Award winning’ GRA to work and going after direct taxes especially with the Ghana Card expansion efforts. Also, other tax types like the property tax regime await exploitation and could use efforts from our revenue mobilisation apparatus. Although a majority of Ghanaians, the author included, are opposed to the E-levy in any form, our opinions seldom count when the government is as determined as they are now. We may be hitting a self-destruct button. Time will tell.

Contributor: Jonathan Abotiwine Alua

The author is a lawyer with the firm; Law Temple. He’s also a Graduate Assistant at the University of Ghana School of Law where he assists the Tax and Criminal Law teaching teams. His areas of focus are Dispute Resolution, Taxation, Criminal Law, Fintech Regulation, Intellectual Property Law and Commercial Law. Views expressed in this article are entirely his and do not in any way represent those of the Media General Group.


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