E-Levy will distort tax structure – Seth Terkper

Former Finance Minister, Seth Terkper, has said government’s proposed Electronic Levy (E-Levy) will distort the tax structure, arguing that it will lead to paying double tax and also result in paying taxes on savings, which is inappropriate.

He said the situation will lead to the avoidance of tax where people will be seen going back to the cash system and also reduce demand for electronic financial services.

He also said it is capable of causing burden to businesses and consumer as it will increase prices and inflation.

“When you are paid, your tax is deducted at source and then you take the difference and go and put it in your wallet to transfer to your poor mother, and government want to tax that too, this is the tax on tax being explained.

I think we should get the significant point clear that when you take money to the bank, the bank is giving you a service against the risk of keeping it at home, and for that, it attracts a fee and it’s like you are consuming a service which also attracts VAT.

We have a very rationale tax system, let’s not destroy it. These things were corrected in the 1990s, and all of us Ghanaians went through streamlining these structures. It’s the spending that attracts VAT, or import duty and other taxes, not the savings,” he said at the PFMTAX Africa network dialogue on Ghana’s economic outlook held in Accra.

Government has projected a deficit of GH¢37billion by end of 2022, as revenue is targeted at GH¢100.5billion against expected expenditure of GH¢135.6billion. Meanwhile, the E-levy is expected to rake in some GH¢7 billion.

According to the former minister, the e-levy cannot resolve the fiscal challenges, hence, government must look for solutions that are equitable and fair.

“The essence of a program is not to tackle every problem, taxing alone wouldn’t resolve it, it is distorting. BoG used the growth of the mobile money space for intervention during the COVID-19, which indicates how crucial the space is to the financial services especially in the digitilisation era, for that matter its success shouldn’t be ruined,” he said.

He also questioned the initiative asking government to come clear on whether the E-levy is going to be temporary or not.

For his part, an economist, Dr. Dennis Nsafoah said the government is contradicting itself with the introduction of the e-levy because of its digitization agenda.

He said the e-levy is inimical to an economy which intends going cashless and seeks to boost economic growth in the era where fintech is making strides.

Another economist, Dr. Theophilus Acheampong, called the E-levy is a lazy approach to taxing as it will kill other potential industries.

The E-levy

According to the Finance minister, Ken Ofori-Atta, the E-levy will affect mobile money transfers between accounts on the same electronic money issuer (EMI); mobile money transfers from an account on one EMI to a recipient on another EMI; transfers from bank accounts to mobile money accounts; transfer from mobile money accounts to bank accounts; and bank transfers on a digital platform or application that originates from a bank account belonging to an individual to another individual.