- December 4, 2021
- Posted by: Ato
- Category: Economics
Former Minister for Finance, Seth Terkper, has said government potentially faces a shutdown next year.
The possible shutdown of government, the former Minister noted, comes on the back of the current stalemate on the passage of the 2022 budget.
According to Mr Terkper, the introduction of the electronic transaction levy is the main contributory factor to the current stalemate on the passage of the budget, further asserting that a consensus should be built around the E-Levy to allow the passage of the budget else there will be no spending by government in 2022 thereby causing the shutdown of government activities.
“If we do not resolve the stalemate on the 2022 budget, there will be no budget to spend in 2022 because there will be no law backing the 2022 budget because it hasn’t been approved by Parliament.
“And when that happens, it is going to result in a shutdown of government activities, and this means no monies for government to run it’s activities and payment to public sector workers ceases,” he stated.
“I think the public has taken the passage of the budget for granted and we need to educate the public on the implications of some these things. Ghanaians I must say are fortunate to have Parliament on an annual basis agree and approve the budget without issues like this happening. But now that we have such an issue, I think we should educate the public on it,” he added.
The 2022 budget was rejected by the Minority Caucus in Parliament on November 17, 2021.
Although the budget was rejected by the Minority Caucus, the decision was later overturned by the Majority Caucus with the budget approved by Parliament.
The rejection of the 2022 budget by the Minority was mainly due to the lack of consensus built by both sides on the E-levy.
The announcement of the 1.75 percent E-levy on mobile money and all electronic transactions in the country by the Finance Minister have resulted in a huge public outcry.
Aside the Minority, industry groups such as the Ghana Chamber of Telecommunications, eCommerce Association of Ghana, Association of Ghanaian Industries and others have kicked against the levy saying it is ill-timed and counterproductive to the industry and to government’s own financial inclusion agenda.
But according to the the Finance Minister, the introduction of the E-Levy forms part of a number of measures to widen the tax net to ensure all Ghanaians pay their fair share of taxes.
The Minister during his presentation of the 2022 budget and assigning reasons for the levy, noted the outbreak of the Covid-19 pandemic contributed to the acceleration of digitalization and its usage in Ghana, and that led to over 120 per cent increase in the value of digital transactions in the country as of February 2021.
“Total value of transactions for 2020 was estimated to be over GHS500 billion compared to GH¢78 billion in 2016 just 5 years ago, while total mobile money
subscribers and active mobile money users have grown by an average rate of 18% and 16% respectively between 2016 and 2019.
“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.
“Electronic transactions covering mobile money payments, bank transfers, merchant payments and inward remittances will be charged at an applicable rate of 1.75%, which shall be borne by the sender except inward remittances, which will be borne by the recipient,” he said.
The Minister however noted that to safeguard efforts being made to enhance financial inclusion and protect the vulnerable, all transactions that add up to GHS 100 or less per day (which is approximately GHS 3000 per month per person) will be exempt from the E-Levy.
Meanwhile, in a shocking u-turn, the Leader of the Minority Caucus in Parliament, Haruna Iddrisu, has called on government to reduce the charge rate of 1.75 percent for the yet to be implemented electronic transactions levy by 0.75 percentage points.
According to the legislator, the charge rate for the E-Levy should be 1 percent rather than the proposed 1.75 percent charge rate.
Additionally, the lawmaker is calling on government to increase the exemption threshold from GHS 100 to GHS 300.
Making the call while delivering a speech at the launch of the 10th anniversary of Ghana Chamber of Telecommunications on Thursday, December 2, 2021, Mr Iddrisu noted the GHS300 threshold instead of GHS100 will prevent financial exclusion.
“The GHS 300 threshold instead of GHS 100 will prevent financial exclusion because many Ghanaians transact more than GHS 100 in a day, and these monies may not necessarily be theirs, so it will not be fair to tax them on those moneys [sic],” he noted.