The Ghana Fintech and Payment Association, a significant industry association that represents the country’s fintech sector, has issued a strong warning against any attempts to tax the booming industry.
The association’s president, Martin Kwame Awagah, emphasized the potentially disastrous repercussions of taxing the fintech sector in an article titled “Ghana’s E-Levy Debate and Rising Fintech Scene,” underlining the detrimental impact on investment, growth, and efforts to broaden financial inclusion.
The debate surrounding taxation in Ghana has gained traction with the International Monetary Fund (IMF) advocating for the adoption of three tax mobilization measures, including Income Tax, Excise Duty, and Growth and Sustainability.
These measures are projected to generate approximately GH¢4 billion annually for the country, contributing to the need for additional funds to meet rising expenditure.
However, Martin Kwame Awagah stressed that fintech companies are often startups with limited resources, and subjecting them to additional taxes would create challenges in raising capital and expanding operations.
Mr. Awagah further warned that taxing the fintech sector will stifle innovation and slow the sector’s overall growth.
He pointed out that fintech firms are already subject to a variety of taxes, including corporate income tax, value-added tax, and withholding tax. The imposition of a new tax on electronic transactions, he said, would raise the cost of financial services for both consumers and businesses, potentially discouraging their use.
It is important to note that the government had previously introduced an Electronic Transaction Levy, commonly known as the E-levy, which initially stood at 1.5 percent.
The levy encompassed all electronic transactions, including mobile money transfers, bank transfers, and credit card payments. The aim was to generate revenue to fund development projects and reduce the country’s budget deficit.
However, the E-levy has faced challenges, with its revenue falling significantly short of initial expectations. As of May 2023, the levy had only generated GH¢860 million, representing a shortfall of about 80 percent from the projected GH¢6.9 billion.
Government Urged To Create A Flexible Business Operating Environment
The Association President, Mr. Martin Kwame Awagah has urged the government to collaborate with industry stakeholders to create an environment conducive to fintech growth. This, he said, could involve providing tax breaks for fintech companies and investing in financial education.
Awagah also proposed the establishment of a “fintech fund” to drive the development of innovative products and services.
The potential of the fintech sector in Ghana is undeniable. Recent research conducted by McKinsey and Company in 2022 revealed that the fintech space in sub-Saharan Africa is expected to witness an average compound annual growth rate (CAGR) of 10 percent. Notably, Ghana’s market is projected to experience an even higher CAGR of 15 percent, surpassing other countries on the continent.
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