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Ghana is a country located in the western part of Africa with one of the fastest growth of GDP in the sub- region.
In recent times, the one thing that has caught the attention of many Ghanaians home and abroad is the introduction of E-levy been proposed in the national budget.
Now, the question is “ what is the E-levy about?
The E-levy is a new tax measure that will be applied on the only the originator of a transaction on an electronic platform. Electronic platforms include the following; fintech platforms, online banking and MOMO platforms.
What is the percentage?
The value of the E-Levy is 1.75%. The government will apply a rate of 1.75% on all applicable transactions.
How Is it Applicable?
The levy will be applicable on the value (amount) of every transaction above GHS 100 on a daily basis. That is, after every GHS 100 (cumulatively spent) the e-levy will be applied. For instance if Johnson sends GHS 70.00 to his sister in the morning and sends another GHS 30.00 (totally GHS 100) to his brother in the afternoon, he will not pay the E-levy. However, any another payment after this threshold, will attract the e-levy.
What does the e-levy entails?
The levy will cover the following;
- All Person to Person mobile transactions (sending of funds to another account, payment for goods and services, payment of utilities (please note that payments for government fees and charges; are exempted)
- All Merchant payments; and
- All inward remittances (to be borne by the recipient)
Please note that transfers from personal wallets to banks accounts and vice versa will not attract this levy.
Usage of the revenue generated from the E-levy ( if approved)
The monies will be used to support government initiatives such as youth employment and entrepreneurship, roads and digital infrastructure and security.
When is this supposed to come to effect?
The policy comes into effect from 1st February , 2022. This is to provide enough lead time for the industry players to adjust and configure their systems to implement this policy.
Which body will be responsible for the collecting the E-Levy?
Government, through the Ghana Revenue Authority will collect the E-Levy in collaboration with the Telcos, Fintechs and Financial Institutions.
Why the move to levy electronic transactions?
The E-Levy of 1.75% is being introduced because of the increased growth in mobile money transactions, which poses a possible threat to government tax income. This is because Digital payment systems are currently largely untaxed, and while the industry grows, several government tax revenue sources are seeing a decline in growth.
- How about inward remittances?
- The e-levy will also apply to all inward remittances. An applicable rate of 1.75% shall be borne by the recipient of the funds.
- Has this been done in any other country?
- Yes. So far, 26 countries have enacted the legislation for digital taxes. (Source: KPMG, Taxation of a digitalised economy (as at 28th September 2021)
- These countries include; Kenya, Nigeria, South Africa, Egypt, Tanzania, Mauritius, Uganda, Cameroon, and Zimbabwe and other countries globally have introduced some form of Digital Service Tax/Levy.
How many new taxes has the government introduced? And how many have been scrapped?
7 New Taxes Introduced since 2017:
- VFRS introduced for retailers and wholesalers at 3%
- VAT withholding introduced
- COVID-19 Health Levy introduced, adding 1 percentage point to both VFRS and NHIL
- Introduced a 5% financial sector clean-up levy
- Introduced 30% income tax rebates for companies operating hotels and restaurants, education, arts and entertainment, and travel and tours from April to December 2021
- Introduced 1% COVID-19 Health Levy
- Introduced 10 pesewas Sanitation and Pollution Levy and 20 pesewas Energy Sector Recovery Levy (Delta Fund)
Nine scrapped taxes
- Abrogated the 1 percent Special Import Levy;
- Abrogated the 17.5 percent VAT/NHIL on financial services;
- Abrogated the 17.5 percent VAT/NHIL on selected imported medicines, that are not produced locally;
- Abrogated the 17.5 percent VAT/NHIL on domestic airline tickets;
- Abrogated the 5 percent VAT/NHIL on Real Estate sales;
- Abrogated excise duty on petroleum
- Abrogated duty on the importation of spare parts;
- Abrogated levies imposed on ‘kayayei’ by local authorities;
- Abrogated levies imposed on religious institutions by local authorities;
Now the question I keep asking myself is;
Why is the minority in parliament opposing it ?
Could it be that they are indeed expressing the thoughts of Ghanaians or Is it for their own personal interests ?
Well, Only Time will Tell