Research conducted by the Centre for Economics, Finance, and Inequality Studies (CEFIS) has shown that Ghanaian Mobile Money (MoMo) users have devised new ways to avoid the payment of the Electronic Transaction Levy (E-levy), while their merchant counterparts are also milking the government from expected revenues.

CEFIS explained that Mobile Money (MoMo) merchants, whose number has been increasing are milking the Government of expected revenue from the E-levy as merchants negotiate with customers for a fee, making customers avoid the payment of the tax.

According to CEFIS, some merchants admitted some people deposit money to recipients through them to avoid the payment of the E-levy, while others allowed cash-out from their end instead of transferring the money to the recipients directly and paying the corresponding tax.

“In many commercial transactions, the parties involved negotiate based on a ‘gentleman’s agreement’, where the sender deposits cash into the wallet of the receiver through a MoMo merchant account to avoid the payment of its corresponding e-levy charge.”
CEFIS

Using E-levy as a Conduit to Get the Informal Sector to Contribute to National Revenue failed

Prof Anthony Amoah, a co-author of the study, stressed saying, “We observed that consumers have created a gateway to avoid the tax, giving that tax avoidance is not criminal.” He averred that the strategy of using the e-levy as a conduit to get the informal sector to contribute to national revenue has failed, as the informal sector, the most active group, is exploiting the loopholes.

“Those who do transactions like GHS50 and GHS100 are already exempted from paying the tax but those who pay above the cumulative GHS100 are avoiding it and it’s actually those who are doing bigger transactions that do it more. This means that it is the agent that benefits and not the Government, and we found that the number of agents is going up because it’s more profitable to be in that business, but it is very discouraging to the Government.”
Prof Anthony Amoah

Prof Amoah, who is a Development Economist, suggested that “If the Government reduces rate from the 1.5 percent to 0.5 percent and people don’t feel the impact, then you’re going to rake them in”.

Meanwhile, evidence from the simulations suggested that if the e-levy was revised to 0.5 per cent, and 54 percent of the existing active users patronized MoMo transactions, the expected revenue for 2022 would be GHS2,640,600,000.81.

That revenue would rise by 21.4 percent to yield GHS3,205,688,401.01 in 2023, and in 2024, reach GHS3,635,234,306.60, and by 2025, the projected revenue from e-levy would reach GHS4,043,980,051.74.

The 2021 Bank of Ghana (BOG) Payment Systems Oversight Annual Report noted that the total number of active mobile money customers increased by 2.4 percent year-on- year, with active mobile money agents growing by 29 percent year-on-year.

The Electronic Transactions Levy Act, which was introduced in May 2021, comes with a 1.5 percent charge on transactions exceeding a cumulative GHS100 per day in addition to charges by service providers (MTN and Airtel Tigo).

The tax was intended to shore up the Government’s revenue, and the study noted a reduction of the rate from 1.5 percent to 0.5 percent would make existing active users patronize MoMo transactions.

The revenue from the E-levy is intended to support the Government’s YouStart entrepreneurship programme, digital infrastructure, and cybersecurity, and increase Ghana’s tax-to- GDP ratio to 20 percent by 2024 for national development.