A tax expert, a Senior Lecturer at the University of Ghana, and the Director of Ali-Nakyea & Associates, Dr. Abdallah Ali-Nakyea has advised the government to do a dynamic analysis before attempting to place a tax on MoMo transaction fees charged by telecommunication companies in the country.
According to him, if the government goes ahead to impose any tax on MoMo transaction fees, that will only result in a rise in the cost of doing business in the country.He indicates that the country is still battling with challenges of business persons being accosted by armed robbers and so, MoMo has become a convenient means by which they have to make payments.
“Because, sometimes, if you do a static analysis, you will look at the volume of MoMo transactions and you will say, for instance, that if we even put 1%, we will get so much; that is static analysis. But a dynamic analysis will be if you impose 1%, what will be the repercussion on the sender and the receiver? So, you have to trace it and see where it will end to be able to determine whether it will be feasible or not. So, a static view of it will come to a conclusion that a dynamic analysis may not support”.
Dr. Ali-Nakyea was reacting to comments made by the Minister-Designate for Communications and Digitalisation, Ursula Owusu-Ekuful, when she appeared before the vetting committee that the transaction fees generated by operators from the huge traffic volumes recorded on mobile money platforms, need to be taxed to raise revenues for the country.
He explains that whatever gains that are being made on the MoMo transactions will reflect in the profits of the institutions or companies engaged in them which is already being taxed. He then added that any tax on MoMo transaction fees, may even run counter to the government’s efforts to consolidate its gains in the financial inclusion agenda.
Aside from the rise in the cost of doing business and the threat to financial inclusion in the country, Dr. Ali-Nakyea told The Vaultz News that MoMo transactions, are only a part of the entire financial value chain and so, it will be against the principle of equity or fairness if the government singles out MoMo transaction fees and places a tax on them.
“…Are you going to look at the taxation of other financial transactions undertaken by the banks?”, Dr. Ali-Nakyea questions. He, however, suggested that “the point is that it’s not all of them who charge. For instance, Vodafone is free; so, you can’t make that blanket statement.
“So, like I’m saying, taxation is not just about revenue generation, we have the other reasons why we may want to tax. So, for me, the figures must be analyzed. At what point are you imposing the tax? Who will bear the tax? What will be the impact of the tax? We need to run through all that before.
“So, we need to compartmentalize it and let those who are experts in the revenue aspect to look at the idea and come and tell us whether such a policy will be feasible or not. … you don’t bring it and soon withdraw it; it becomes a nuisance tax. We saw it with the luxury vehicle levy, we have seen it with VAT on financial services; all in and out, and that can create a kind of uncertainty in revenue streams and business planning”.
He is, therefore, calling for a broader consultation with other stakeholders especially the tax policy unit of the ministry of finance to critically analyze the observation by the Minister-Designate to come up with a conclusion that will be benefit to all in the country.
“The question is: what interactions have they had with the ministry of finance which has the tax policy unit? So, I think the ministry of finance and its tax policy unit can pick it up, examine it and come out with their findings, and then the whole nation debates it.
“It is something they have identified, but we have to make a case; let the experts look at it. Everybody needs revenue to run the country, but then, in taxation, we don’t impose a tax that will lead to a distortion in the market. Because at the end of the day, if you don’t do the equivalences, you may end up losing a trend of revenue on another angle because of what you impose. So, that is why I say it is something we need not rush into. We can look at other countries and see what is being done and how it has contributed to business growth”.
Furthermore, Dr.Ali-Nakyea seized the opportunity to educate the general public by distinguishing between double taxation and the tax-saving effect of a tax.
“When we talk about double taxation, we are referring to the same income being taxed twice in the hands of the same person. But this one [the tax on the MoMo transactions] will be in the hands of different persons, so it will not be double taxation, properly so-called, but another form of what we call a tax-saving effect of tax, which happens with the indirect tax; you are putting a tax upon a tax. And that is why we are saying it will make the cost of that transaction more expensive”.
During her vetting, Madam Owusu-Ekuful pointed out that the State stands to lose money from the traditional revenue streams because of the evolution of technology. She pointed out that some of the telecoms are phasing out the sale of scratch cards forcing their clients to buy airtime on mobile money. This, she believes is robbing the state of revenues that it would have gotten from the sale and receipt of scratch cards.