On May 1, 2022, Ghana rolled out the implementation of the Electronic Transfer Levy Act 2022 (Act 1075). This Act represents one of the most talked-about in the history of our growing 4th Republic. The furore it created in parliament and the media and private conversations did not end with the passage of the bill, and was subsequently assented to by the President. Passionate discussions have been held, and they will undoubtedly continue for some time.
Act 1075 imposes a tax of 1.5% on selected electronic transactions. The Ghana Revenue Authority (GRA), the government agency charged with the implementation of the Act, states that the levy is charged at the time of the electronic transaction. The levy applies to the following transfers:
- Mobile money transfers done between accounts on the same electronic money issuer
- Mobile money transfers from an account on one electronic money issuer to a recipient on another electronic money issuer
- Transfers from bank accounts to mobile money accounts
- Transfers from mobile money accounts to bank accounts
- Bank transfers on an instant pay digital platform or application originating from a bank account belonging to an individual subject to a daily threshold to be determined by the Minister of Finance.
The Authority further lists the charging entities as:
- Electronic money issuers
- Payment service providers
- Specialised deposit taking institutions
- Other financial institutions prescribed by regulations made under the Act
According to section 2, sub-section 2 of the Act, the levy does not apply to:
- A cumulative transfer of one hundred Ghana cedis (GH¢100) a day made by the same person
- A transfer between accounts owned by the same person
- A transfer for the payment of taxes, fees and charges on the ‘Ghana.gov’ system or any other Government of Ghana-designated payment system
- Specified merchant payments
- Transfers between principals, agent and master-agent accounts; and
- Electronic clearing of cheques
Significant to note, the charge does not apply to international inward transfers. Therefore, Wofa Kwasi – who regularly receives remittances regularly from his niece, Adwoa, in Germany – won’t have the levy deducted from his receipts of money she sends.
Many transfers by mobile money are quite small amounts but a majority would most likely be more than GH¢100 a day per person. It is usual for people to transfer more than GH¢100 in a day, even if it is not every day. Undoubtedly, the fear of many people will be realised – their transactions will be captured by the levy.
Many of us have begun re-evaluating the way we use the various MoMo platforms. There are those who have, understandably, vowed to forgo the convenience afforded by mobile money transfers to avoid payment of the levy. Some have decided to make sure they keep within the limit.
Others, too, have taken the decision to adopt various strategies, all in a bid to avert the situation where they will be levied. However, the question is: eventually, will we all forgo the convenience of electronic transactions as a direct consequence of the ‘nuisance’ of this levy?
E-Levy & Investments
More important for us in the investment community is the implication for investments. Neither the Act nor GRA clearly prescribe how the law affects transfers for the purposes of settling investment purchases. Investments already are subject to charges from service providers such as banks, regulators, market platform providers and investment management and brokerage service providers.
The imposition of additional tax (from the E-levy) could be burdensome for all investors. If, however, the E-levy is applicable directly to investment transactions in its implementation, clarity would arm investors with the choice of what mode of payment or transaction would suit their purposes. The regulator, Securities and Exchange Commission (SEC), has intimated they will engage about this.
Taxes and levies are always unpleasant. In developed economies like the Scandinavia and Canada, tax rates are comparatively high. Those who live there do not necessarily find it pleasant but they realise it enables government to embark on certain policies for the benefit of residents.
They empower the governments to implement various social interventions which support quality life for the citizenry and residents in general. These include interventions in healthcare, education and housing for the most vulnerable in society. It takes money and it must be paid for.
A very important consideration is transparency. The public purse is public, not for private use. The public – you and I – needs many things done: infrastructure, social services and generally, for the machinery of government to run well for the benefit of citizens. We have all had occasion to bemoan the use to which public funds have been applied. Worse still, no sunlight is thrown on certain expenditures until they are uncovered by the Auditor-General and presented to the Public Accounts Committee of Parliament.
Section 7 of the Act, ‘Submission of reports’ states:
- The Ghana Revenue Authority shall submit to the Minister (of Finance), quarterly reports on the performance of the revenues from the electronic transfer levy not later than one month after the end of the quarter.
- The Minister responsible for Finance shall submit to Parliament a report on the funds accruing from the electronic levy transfers,
- In the Mid-year review of the budget of that financial year covering the first half of the financial year; and
- Within two months after the end of the financial year covering the second half of the immediately preceding financial year.
Reporting of proceeds from this tax and the use to which funds have been put is cardinal. We, the public who are paying this levy, either because of the use of mobile money platforms or bank transfers, ought to know. We ought to assure ourselves that the levy, whose passage into law held parliamentary work to ransom for some weeks if not months, has been put to use in a manner that is right, fair and beneficial to us and generations after us. We would have this guarantee that the GH¢7.50 we pay as tax on the GH¢500 we transfer via MoMo is part of the financing for a railway project to facilitate inter-regional trade, for instance.
To this end, although the proceeds, by law, are to be paid into the Consolidated Fund, and the amounts so collected reported, it would be helpful to additionally show what the funds have been used for. We recall how, across the country, the use of HIPC funds were shown on project billboards. The public could see clearly that those funds were being used for public projects that were not confined to any particular part of the country. This layer of transparency is important as it promotes confidence in our state institutions and their mandates.
Beyond duly collecting and paying proceeds into the Consolidated Fund, these funds should be tracked and reported separately. How they are used should also be disclosed. These will garner accountability and trust in government expenditures. This will dispel fears that we will be duped, and the monies will be ‘chopped by heart’. Disclosure could help; after so much misgiving from the moment the bill that eventually led to the Act was put together. We would gradually warm up to the Act and its implementation, supposed to rake in over GH¢6billion annually.
The Times We’re In
The timing of the Act and its implementation have been problematic, mostly because of the difficult times we are in. The economic stress – affecting all aspects of our daily lives – has dragged on since the advent of COVID-19 in March 2020 and has been made worse by the recent downgrading of the country’s sovereign credit ratings by Fitch and Moody’s, as well as Russia’s invasion of Ukraine in February. It was, therefore, not surprising that there was open opposition to the passage of the bill for so long.
Now that it has been passed, the onus lies on government, and specifically the GRA, to account for collections and their use. Hopefully, revenue expectations will be met. More importantly, reports on collections and use will be done to engender trust in the work of state institutions.