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Drop the momo tax proposal – Government told

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The Consumer Advocacy Center (CAC) has noted that at a time the Ghanaian consumer is expecting reduction in fuel price in order to slow-down the rising prices of food commodities in the market, the government has however decided to surprise consumers of the digital financial ecosystem, by announcing a 1.75% tax on all Electronic Transactions.

Finance Minister Ken Ofori-Atta announced a new levy to be charged by government in 2022 on all electronic transactions to widen the tax net and rope in the informal sector.

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“It is becoming clear there exists enormous potential to increase tax revenues by bringing into the tax bracket, transactions that could be best defined as being undertaken in the ‘informal economy’,” Mr Ofori-Atta observed on Wednesday, November 17 as he presented the 2022 budget statement in Parliament.

“After considerable deliberations, government has decided to place a levy on all electronic transactions to widen the tax net and rope in the informal sector. This shall be known as the ‘Electronic Transaction Levy or E-Levy’.”

He explained that the new E-levy will be a 1.75 per cent charge on all electronic transactions covering mobile money payments, bank transfers, merchant payments and inward remittances to be borne by the sender except inward remittances, which will be borne by the recipient.

This will, however, not affect transactions that add up to GH¢100 pr less per day.

“A portion of the proceeds from the E-Levy will be used to support entrepreneurship, youth employment, cyber security, digital and road infrastructure among others.”

But in a statement, the Consumer Advocacy Center (CAC) said it is unable to comprehend the rationale behind such a decision; which ostensibly was made without consultations for input from both the business community and consumer organisations, alike.

“We wish to remind Government, that it is not for nothing that the Ministry of Finance has instituted the practice of holding pre-budget hearings to solicit the views of stakeholders. We therefore condemn the current posture of the Government to spring surprises on the vulnerable Ghanaian consumer.

“Excerpts of the 2022 Budget and Economic Statement indicate, that government has sacrificed the collection of Road Tolls; and in it’s place, introduced the Digital Tax (e-Tax). Also, CAC has, noticed a not less than 15% increment in all government fees and charges beginning January 2022.

“In narrowing down on the impact of this 1.75% e-Tax on Mobile Money transfers alone, we of CAC estimate, that government is seeking to make over GHC 8 billion from Mobile Money transactions for the year 2022 (based on the record of GHC 569 billion realized as total volume of MoMo transactions recorded in the year 2020).

“This estimated GHC 8 billion represents a 10,000% jump in revenue generated from toll booths in a year (GHC 80 million). Government must therefore admit that a 10,000% jump in revenue collection in a single year, will certainly rob the citizens off their disposable incomes and deny them the enjoyment of basic commodities that make life worth living.

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“Besides, the consequential inflation due to this valueless introduction into the financial equation of the economic consequential inflation due to this valueless introduction into the financial equation of the economy, this will further dry up savings and reduce the value of the cedi, thereby eroding gains in the economic management of the country in the short to medium plannings.

“We call on the Minister of Finance to consider a review of his decision and consequently engage the stakeholders leading to tabling a fresh proposal to parliament, in which he will reduce the rate of the digital tax to 0.5%.

“We are still in a state of surprise at government’s announcement, knowing very well how the application of such e-tax has negatively impacted efforts at financial inclusion in some African countries.

“The Minister of Finance and Economic Planning, and the Minister of Communications and Digitisation are both very much aware of the very elastic response of the Ghanaian consumer to charges on Mobile Money transfers, when charges are above 1%. We are all happy with the astronomical growth of mobile money transactions, which is largely due to the non-punitive nature of the charges.

“As a nation witnessing a vigorous campaign mounted by a telecommunication company offering zero charges on all financial transactions done on it’s platform by subscribers, much is expected of government to beef up leadership gap as exhibited by this corporate bod this corporate body.

“For whatever that should be the consequences, this business entity has taken the onerous responsibility to absorb all related management charges involved. By implications, the sacrifice is meant to attract more cash-holding consumers from the cash market and transfer same onto the e-cash system.

“It is befuddling for the same government that knows this fact, and busily touting the need to build a cashless society, to turn round and slap such a burdensome tax regime on consumers the electronic financial ecosystem.

This 1.7% tax is clearly a disincentive for the sceptic segment of consumers who were considering going onto the digital financial ecosystem.

“We ask: if these telecommunication companies, who have invested heavily in capital assets to set up their various mobile money platforms, are willing to offer zero charges in order to encourage consumers and grow the electronic payment systems, why should the government which hasn’t spent in that regard, slap a 1.75% tax on the same consumer being wooed unto digital payment platforms?

“As consumer advocates contributing to policy, we hereby call on the government, to increase the starting amount taxable from the proposed GHC 100 to GHC 500; so as to avoid taxing a bracket of the very poor in society, who survive merely on remittances from children, friends and relatives.

“A 0.5% tax on mobile money transactions alone will fetch about GHC 2.7 billion to the government next year, even as the GHC 80 million yielding Toll Booths remain closed.

“This GHC 2.7 billion that will be realized by government will add up to the revenues that will be mobilized from the at least 15% increase in fees and charges by all government services come 2022.”

Source 3news

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