The E-levy is a new tax measure that will be applied only to the originator of a transaction on an electronic platform. Electronic platforms include the following; fintech platforms, online banking and momo platforms.
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How much is the E-levy?
The value of the E-Levy is 1.75%. The government will apply a rate of 1.75% on all applicable transactions.
How will the levy be applied?
The levy will be applied to the value (amount) of every transaction above GHS 100 on a daily basis. That is, after every GHS 100 (cumulative spend) the e-levy will be applied. For example, if Kofi sends GHS 50 to his sister in the morning and sends another GHS 50 (totally GHS 100) to his brother in the afternoon, he will not pay the E-levy. However, any other payment after this threshold will attract the e-levy.
What do transactions fall under the E-Levy?
The levy will cover the following;
- All Person to Person (P2P) mobile transactions (i.e sending of funds to another account, payment for goods and services, payment of utilities (please note that payments for government fees and charges; are exempt)
- All POS/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.
What will the revenue generated by the E-Levy be used for?
The monies will be used to support government initiatives such as youth employment and entrepreneurship, roads and digital infrastructure and security.
When will this come to effect?
The policy comes into effect from 1st January 2022. This is to provide enough lead time for the industry players to adjust and configure their systems to implement this policy.
Who will be 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 has GoG decided to levy electronic transactions?
- Mobile Money and other digital financial services have experienced steady growth in the past few years. Digital payment systems are currently largely untaxed, and while the industry grows, several government tax revenue sources are seeing a decline in growth. This is a good opportunity to generate more revenue for structural transformation and infrastructural development in the country.
- Also, it will rope in the informal sector who largely do not put/pay taxes.
How different is this tax from the Financial Services Tax of 17.5% that was introduced by the NDC in 2014 that was abolished in 2017?
The Mahama administration introduced the VAT of 17.5% on financial services in 2014 in a bid to rake in more revenue after it was struggling to meet revenue targets. The implementation of the 17.5 per cent VAT on fee-based financial services took effect from the beginning of 2015, followed by the Presidential assent given to the VAT Act 2013 (Act 870) on December 30, 2013, and it is subsequent gazetting the following day. The charges affected a range of services provided by financial institutions, including fee-based services such as advisory services, safe-keeping, fees on ATM transactions and portfolio management services. The inclusion of financial services within the VAT net was to help offset the cut in government revenues from reductions in import tariffs.
However, this 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.
With debt to GDP at 77% and an ongoing commitment to fiscal consolidation, the E-Levy is an opportunity to advance the “rebalancing” of government books after the extraordinary expenditures that arose from mitigating the impact of the pandemic
How about inward remittances?
The e-levy shall 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 proposed/enacted the legislation for digital taxes. (Source: KPMG, Taxation of a digitalised economy (as of 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.
Will there be a cap on the fees?
If I encounter some trouble, who can I call?
A 24-hour service centre will be set up to help individuals who may need further clarification or who might be experiencing any challenges. The call lines will be announced shortly.
I thought the Government said that they were a government of production?
Yes, we are. It still holds. When NPP came into power, we abolished 9 nuisance taxes which hitherto inhibited the business environment and Ghanaians in general. Beyond that, the Government has introduced/reviewed policies and programmes that create a conducive environment for businesses to thrive. The impact of these policies reflects global cooperation setting up their operations in Ghana (i.e Twitter, Volkswagon etc).
We are encouraged to pay our taxes through ghana.gov. Will the government tax the tax payment through ghana.gov?
No, the payment of taxes etc in Ghana.Gov does not incur the E-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
- Introducing a 5% financial sector (“finsec”) clean-up levy
- Introducing 30% income tax rebates for companies operating hotels and restaurants, education, arts and entertainment, and travel and tours from April to December 2021
- Introducing 1% COVID-19 Health Levy
- Introducing 10 pesewas Sanitation and Pollution Levy and 20 pesewas Energy Sector Recovery Levy (Delta Fund)
Nine scrapped taxes
- abolish the 1 percent Special Import Levy;
- abolish the 17.5 percent VAT/NHIL on financial services;
- abolish the 17.5 percent VAT/NHIL on selected imported medicines, that are not produced locally;
- abolish the 17.5 percent VAT/NHIL on domestic airline tickets;
- abolish the 5 percent VAT/NHIL on Real Estate sales;
- abolish excise duty on petroleum
- abolish duty on the importation of spare parts;
- abolish levies imposed on kayayei by local authorities;
- abolish levies imposed on religious institutions by local authorities;
A review release detailing the implementation process will be published in the next few days by JBKlutse.com