“We Propose 0.5% for E-Levy,” says IEA, Claiming 1.75% is “Too High.”


The debate over the proposed 1.75 percent Electronic Transaction Levy in the 2022 Budget and Economic Policy will continue, as the Institute of Economic Affairs proposes a 0.5 percent levy.

This, it believes, will reduce the burden on consumers while avoiding negative public reactions.

The IEA claims that the 1.75 percent levy is excessive, given that telecom companies already charge one percent as service fees.

“While we believe the E-Levy is an innovative idea for increasing revenue mobilization, we have some reservations,” said Dr. John Kwakye, Director of Research.

“Customers will pay a 1.75 percent levy on momo transactions, on top of the 1.0 percent already levied by Telcos, for a total levy of 2.75 percent.” This is extremely high. “We would propose 0.5 percent for the E-Levy, bringing the total levy to 1.5 percent, to ease the burden on customers and avoid any negative reactions,” Dr. Kwakye explained.

“We don’t see why a portion of the E-Levy should be linked to the targeted objectives.” This amounts to additional revenue earmarking on top of the existing earmarking for statutory funds, etc., which introduces additional rigidity into government spending.

“We would rather pay the E-Levy proceeds into the Consolidated Fund pool, where they can be disbursed in a flexible manner,” he added.

The IEA Director of Research went on to say that “the E-Levy has the potential to undermine the significant effort put in by this government to digitise and formalise the economy, and, in particular, promote a cash-less economy, as many people and businesses will revert to cash transactions, with all the risks that entails.”

The government’s proposed tax measures are expected to have a significant impact in 2022, with total revenue expected to increase by 43 percent to 100.5 billion, or 20.0 percent of GDP, from 70.3 billion, or 16.0 percent of GDP in 2021.

However, following the initial sprout in 2022, the IEA noted that the rate of increase appears to slow significantly during 2023-25.

“In fact, in terms of GDP, revenue remains nearly flat at 20.0 percent in 2023, 20.5 percent in 2024, and 20.3 percent in 2025,” it stated.

Even at 20%, Ghana’s revenue/GDP falls far short of the average of around 30.0 percent for its middle-income peers.

“We anticipate that more effort will be made to further scale up revenue over the medium term,” the IEA said.

It also drew attention to the vast revenue potential of the country’s natural resources.

“In the past, we gave away a portion of this revenue to foreign investors through concession contracts.” We can only unlock the revenue potential of our natural resources for development if we ensure that fiscal regimes for their exploitation benefit Ghana rather than investors, as previous regimes did.”