Witten/Herdecke University

Faculty of Economics, Management, and Society

Project Paper

in “Basics in Philosophy II: Philosophy of the Social Sciences

Submitted by

Alex Effah

Course: Basics in Philosophy II: Philosophy of the Social Sciences

Instructor: Prof. Dr. J. Harbecke
Module: MP-CBa-1802; PM6-1
Semester: Summer Semester 2023
Your E-Mail: Alex.Effah@uni-wh.de
Your Student Number: 2200012
Declaration of Independence

I, Alex Effah, hereby affirm in lieu of an oath that I have completed the submitted
work independently and without using any aids other than those specified. The
statements, data, and concepts taken directly or indirectly from other sources are
identified with an indication of the source. In the selection and evaluation of the
following material, the persons listed below helped me in the manner described
for a fee / free of charge.

No other people were involved in the preparation of the content of this

submitted work. In particular, I did not make use of paid help from mediation or
advisory services for this. Nobody has received direct or indirect monetary
benefits from me for work that is related to the content of the submitted work.
The submitted work has not yet been submitted to another examination
authority in the same or a similar form, either in Germany or abroad. I assure
you that I told the truth to the best of my knowledge and that I did not hide
anything.

Date: 6 August 2023

_Alex Effah__

Signature
 GHANA’S ELECTRONIC TRANSACTION LEVY (E-LEVY) POLICY;
THE NEED FOR REFORMATION

Introduction

This study seeks to investigate the need for a review of Ghana’s Electronic
Transaction Levy (E-Levy). It gives a brief background of the introduction of
the policy, highlights the progress of the policy since its implementation so far,
assesses the views of Ghanaians on the policy, reviews similar literature on the
topic, presents an argument against the call for reforms to the policy which has
already been passed by the Parliament of Ghana and gives recommendations in
the form of advice to a sitting member of Ghana’s Parliament to help to achieve
its goal of widening the tax net and improving tax revenue while maintaining
financial inclusion and financial well-being of Ghanaians. The paper sought to
answer two main research questions. One, has the purpose for the introduction
of the Electronic Transaction Levy (E-Levy) been achieved since its
implementation? Two, what reforms can be done to ensure proper
implementation of the E-Levy policy?

On the methodology employed, I assessed the views of Ghanaians on the

implementation of the E-levy policy through the use of semi-structured
questionnaires. I also analyzed data from the Institute of Statistical Social &
Economic Research (ISSER) and the E-levy research committee on the volume
of transactions before and after the implementation of the policy. Again, the
study relies on secondary data from the Ghana Revenue Authority (GRA), and
other similar literature to asses and give an impact analysis of the policy so far.

The paper assumes to be a research work by a research assistant of a member of

Ghana’s Parliament. In this study, I recommend to the member of Parliament
that the E-levy policy should remain in its current state and that it does not need
any reformation. The member of Parliament should rather argue to encourage
the government of Ghana to intensify public education to sensitive Ghanaian
taxpayers to ensure compliance. Also, the government needs to be encouraged
to properly account for and ensure transparency in the usage of the E-levy
revenue.

2.0 Main Part

2.1 Background of The Electronic Transaction Levy (E-Levy) In Ghana

The Minister of Finance of Ghana, Ken Ofori Atta on 17th November 2021
proposed the introduction of the Electronic Transaction Levy (E-Levy) in the
2022 budget statement and Economic Policy of Ghana. The initial rate of the E-
levy was 1.75%. This was to take effect from the 1st of February 2022. Upon
further consultations, the rate was reduced to 1.5% which was to take effect
from 1st May 2022. The E-levy as announced covers mobile money transfers
done between wallets on the same electronic money issuer, transfer from a
wallet on one electronic money issuer to a recipient on another electronic
money issuer, transfer from bank accounts to mobile money wallets, transfer
from mobile money wallets to bank account and bank transfers on an instant
pay digital platform or application which originates from a bank account which
belongs to an individual (Ghana Revenue Authority, 2022). The electronic
transfer levy Act 2022 (Act 1075) imposed a levy of 1.5% on electronic
transfers (Ghana Revenue Authority, 2022). The levy is charged to the
transferer at the time of transfer. The E-levy with a rate of 1.5% on transfers
above GHS100 (approximately 8 euros). The threshold was intended to protect
low-income consumers; however, it appeared to have had a limited impact
(GSMA, 2023). Following further agitations by Ghanaians, In November 2022,
the government of Ghana announced the 2023 Budget Statement and Economic
Policy of Ghana which contained the reduction of the headline rate of the e-levy
from 1.5% to 1% and the removal of the GHS 100 threshold. The reduction took
effect in January 2023, while the removal of the GHS 100 threshold was
rejected by the Parliament of Ghana (GSMA, 2023). This was contained in the
Electronic Transfer Levy Amendment Act 2022 (Act 1089).

Below is the breakdown of the fees and E-levy Rates by transaction, after the
reduction of the levy: Table 1

TRANSACTION FEE E-LEVY

(AMOUNT GHS)
GHS 1 – GHS 50 GHS 0.38 -
GHS 50 – GHS 100 0.75% of transaction -
value
GHS 100 – GHS 1000 0.75% of the specific 1.5% of the transaction
transaction value value after the daily
cumulative GHS 100
non-taxable threshold
Above GHS 1000 GHS 7.5 1.75% of the transaction
value after the daily
cumulative GHS 100
non-taxable threshold.
Source: MTN Ghana, 2023
Some African countries have introduced a tax on mobile money
Table 2
Country Introduction Rate (%) Current Current
Rate % incidence
Cameroon Jan 2022 0.2 0.2 Mobile
money,
electronic
and bank
transfers
Cote Jan 2018 0.5 0.54 Payment
D’Ivoire and cash
transfer
Kenya Jan 2013 10.0 12.0 On
transaction
fees
Malawi Sept 2019 1.0 0.0 -
Tanzania July 2021 3.0 2.0 Sending,
transferring,
withdrawal
Uganda July 2018 1.0 0.5 Withdrawal
only
Zimbabwe Oct 2018 2.0 2.0 Mobile
money,
electronic
and bank
transfers
Source: (International Centre for Tax and Development, 2022)
2.2 Purpose for The Introduction of The Electronic Transaction Levy (E-
Levy)

The E-levy was designed to raise money for the government by extracting larger
tax contributions from Ghana’s informal sector. The E-levy has the potential to
raise considerable revenue (International Centre for Tax and Development,
n.d.). According to the government of Ghana, Ghana’s tax -to-GDP ratio is
barely 13%, well below the 15% per GDP threshold. Thus, the introduction of
the E-levy would help widen the tax net from 13% to 16% (Nutassey et al.,
2023). Further, it will widen the tax income generated from the informal sector
in Ghana (Jazeera, 2022). This is necessary because, for years, the informal
sector in Ghana has been said to be poor at tax compliance (Okpeyo et al.,
2019). Moreover, the government through the Ghana Revenue Authority (2022)
and Ministry of Finance (2022) listed various activities the income generated
from the E-levy would help the government to undertake. These included the
following, first and foremost, it will help the government to deal with its high
debt and not go to the IMF for relief, it would be used to support and widen
entrepreneurship in Ghana; the money generated would help in financing
infrastructure in Ghana and lastly, it will give most Ghanaians the chance to
contribute towards national development.

2.3 Impact Assessment of The Electronic Transaction Levy (E-Levy) Policy

Since Its Introduction

In a GSMA (2023) research on the impact of the imposition of E-levy on mobile

money transactions in Ghana, the authors argued that; the volume of
transactions initially decreased as a result of the imposition of the levy as P2P
transactions fell by 25% on the average after the implementation which
according to him started in March 2021. They remarked that transactions started
to recover slowly in August 2022. On the impact of mobile money revenue,
they highlighted that there was a decrease in revenue from the sector to the
central government following the imposition of the levy as a response from
consumers. They concluded from his analysis that, the implementation of the e-
levy risks rolling back the gains achieved in financial inclusion in Ghana. The
research came out with the following recommendations; Policies must be
balanced with the long-term health of the telecoms and digital sectors in Ghana
and its development and potential for contributing to economic growth, the
research edged the government of Ghana to reduce sector-specific taxation and
minimize tax-induced barriers to the affordability of mobile and mobile
services, therefore broadening the tax base in order to improve efficiency,
achieve higher revenues in the medium term and encourage the formalization of
the economy. Further, the research employed the government to rationalize
taxes on the mobile sector to account for positive externalities of the sector,
remove or reduce the E-levy on mobile money to foster financial inclusion and
economic growth and lastly include a cap on E-levy payments of GHS 2,000.

According to Ahinsah-Wobil, (2022), it is imperative to note that the e-levy has

failed to meet its expectation. To him, the government needs to put good
measures in place to seal the loopholes to prevent any income leakages. He
recommends that education should also conscientize the public on the benefits
of e-levy.

The GSMA report on the impact assessment of the imposition of the e-levy
policy adopted an interpretive approach in coming up with its conclusions. The
researchers performed specific roles in coming up with conclusions and
recommendations on the policy. The study was based on the authors’ interest in
finding the effect of the imposition of the e-levy on the volume of transactions,
mobile money revenue, and financial inclusion. Also, the study by Ahinsah-
Wobil (2022) adopted a realist philosophical approach because his description,
assessment, and recommendations of the e-levy policy were as it is independent
of what people think about it. I believe his recommendations are based on what
he sees and projects the policy to be if foreseeable measures are not put in place
to seal the loopholes in revenue generation and utilization in Ghana.

On the methodology employed, I adopted a mixed method approach which

utilized both qualitative and quantitative research approaches. The study
randomly sampled fifty (50) Ghanaian mobile money users. They were
administered a specially designed questionnaire in a google drive form. The
data collection tools mainly captured quantitative data. The tool also included
open-ended questions about the study area used i.e., Konongo, Ghana. The
selection was based on the following statistics provided by mobile money users
in Konongo with the breakdown as follows; of the 50 mobile money users
76.1% were males while 23.9% were females, 26.1% were between the ages of
20 to 20 years, 45.7% were between 31 to 40 years, 6.5% were between 41 to
20 while 21.7% were less than 20 years. On the respondent’s level of education,
45.7% have bachelor’s degrees, 26.1% were high school level, 17.4% have
master’s degree while the others had basic or no level of education. 78.3% of
the respondents were married while 21.7% were unmarried. On political
affiliation, 32.6% belonged to the ruling New Patriotic Party (NPP), with 6.5%
belonging to the opposition National Democratic Congress (NDC) while 60.9%
declared to have no political affiliation. 54.3% were employed while 45.7%
were unemployed. 93.5% of the respondents indicated using MTN as their
primary telecommunication network while less than 7% indicated having
Vodaphone, or AirtelTigo as their primary network. 97.8% had knowledge
about E-levy while 2.2% of the respondents indicated to have no knowledge
about the E-levy. On the necessity of the imposition of the Electronic
Transaction Levy, 56.5% of the respondents indicated it is necessary, 28.3%
said the imposition of the E-levy is not necessary while 15.2% of the
respondents were indecisive on it. Again, 77.8% indicated that the imposition of
the E-levy has affected their volume of mobile money transactions. 80.4% said
they do not have a problem with the payment of taxes while 17.4% indicated to
have a problem with the payment of taxes. In all, 80% indicated the policy
needs reformation 61.4% think the e-levy should be scrapped, and less than one
percent of the respondents believe the rate should be reduced.

I agree completely with Ahinah-Wobil (2022) that the E-levy has failed to meet
its expectation. I also side with him that the government needs to put good
measures in place to seal the loopholes to prevent any income leakages. I
believe public education is very key to tax compliance. Knowledge about tax
can contribute to shaping attitudes toward compliance. Well-informed citizens
may be more encouraged to comply voluntarily with tax obligations.

Informed by the responses of the respondents, I partly agree with the

recommendations made in the GSMA (2023) report on e-levy impact
assessment. I side with the recommendation that employs the government of
Ghana minimize the tax-induced barriers to the affordability of the mobile
money service. I believe when implemented, it will broaden the tax base and
improve efficiency, achieving higher revenues in the medium term. Minimizing
the tax-induced barriers will also encourage the formalization of the economy.
Again, I agree with findings on the need to rationalize taxes imposed on the
mobile sector to account for positive externalities of the sector. When positive
production and consumption externalities in the mobile sector are properly
accounted for, it will reduce the cost of production, and encourage more supply
thereby increasing revenue generation for the government. I totally disagree
with the recommendation that the government of Ghana has to remove E-levy
on mobile money to foster financial inclusion. If removed, there wouldn’t be
any social contract between the government and mobile users since they have
not made the necessary commitment for the government to base on it to ensure
quality service to consumers. Removing E-levy on mobile money will not
necessarily foster financial inclusion in Ghana. Financial inclusion can be better
achieved by public education. I believe the imposition of tax is a necessary evil
as stipulated by the Woes theory.

Both research should have been pragmatic in their approaches and

recommendations. I will recommend that the government intensify public
education to sensitive Ghanaian taxpayers to ensure compliance. Citizens with
tax education are able to navigate complex tax systems. They may be more
encouraged to comply voluntarily. Taxpayer education can be a key tool to
boost the willingness of individual mobile money users to voluntarily pay tax,
and play a vital role in contributing to national development. I believe the E-
levy policy should remain as it is in its current form. That is, there is no need for
the reformation of Ghana’s Electronic Transaction Levy in its current form. I
will therefore advise the sitting member of Ghana’s parliament to argue against
the call for reformation of the policy and suggest to the government to intensify
public education on the necessity to pay the E-levy. I see the payment as an
innovative way to generate revenue to supplement the government’s revenue
shortfall due to the impact of COVID-19 and Russia’s invasion of Ukraine on
the economy of Ghana. Various means should be adopted to educate the
populace including the use of print media, TV and radio stations, Information
centers, and a toll-free hotline for e-levy education.

Further, I will suggest to the sitting member of parliament that he encourages

the government to properly account for the usage of the E-levy revenue. Trust is
a critical aspect of the contractual fiscal exchange relationship between the
government and its citizens. When the citizenry trusts the government for the
proper utilization of the revenue that will be generated from the e-levy, they will
not be reluctant to pay. The call for increased transparency in terms of the level
of information provided cannot be ignored. Taxpayers often seek to evaluate
their benefits relative to the tax burden. In addition, transparency and
accountability of tax revenue positively impact the number of taxpayers willing
to comply with the tax laws and by extension the tax revenue collection by the
government.

Mobile Money Transactions Pre & Post E-Levy Implementation

(January 2022 to April 2022) Table 3.
Active Mobile Total Number of Total Volume
Money Accounts Transactions of Transactions
January 2022 17.4 million 372 million GHS 76.2
billion
February 2022 18.5 million 365 million GHS 76.8
billion
March 2022 18.9 million 413 million GHS 90.5
billion
April 2022 18.6 million 403 million GHS 87.7
billion
Source: ISSER, 2022

3.0 Counter Argument by Opponents

I believe that opponents may say that taxpayer education will not necessarily
ensure e-levy tax compliance but I disagree with such an assertion because
taxpayer education leads to increased tax compliance. Ideally, taxpayer
education should begin at an early age and continue into adulthood. The aim is
for tax administrations to give citizens the opportunity to understand how the
tax system works and benefits society as a whole, thus developing a culture of
voluntary compliance.

Also, taxpayer education benefits taxpayers more directly. Tax literacy can help
people save money. They may learn, for example, about tax provisions that will
legitimately lower their tax bills, or how to avoid filing late or other pitfalls that
might cause them to incur fines or penalties.

4.0 Conclusions & Recommendations

In conclusion, it can be said that the purpose for the implementation of the E-
levy in Ghana has not yet been achieved since the imposition of the levy could
not help the government of Ghana to generate enough tax revenue to
supplement the government’s merger revenue. This is evident because the
government went ahead to seek a bailout from the International Monetary Fund
(IMF), something which the E-levy was to prevent. It can also be seen from
Table 3 above that the imposition of the e-levy immediately led to the reduction
of the volume of mobile money transactions and thus a reduction in government
tax revenue. Nonetheless, the policy in its current state does not need any major
reformation. I will therefore advise the sitting member of Ghana’s parliament to
argue against the call for reformation of the policy and suggest to the
government to intensify public education on the necessity to pay the E-levy. An
innovative way to generate revenue to supplement the government’s revenue
shortfall such as the use of print media, television, radio stations, and
information centers in the various communities. Also, the government should be
encouraged to properly account for the usage of the E-levy revenue to improve
tax compliance.
References

1. Ahinsah-Wobil, I. (2022). Ghana’s Road Toll and E-Levy: the

Consideration for a Good IMF Deal. Social Science Research Network.
https://doi.org/10.2139/ssrn.4171809
2. Ghana Revenue Authority (2022). Electronic Transfer
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21). Mobile-money taxation in East Africa: Harmonisation or laissez-
faire? - ICTD. ICTD. https://www.ictd.ac/blog/mobile-money-taxation-
east-africa-harmonisation/

4. Jazeera, A. (2022, March 29). Ghana passes controversial tax bill after
opposition walkout. News | Al Jazeera.
https://www.aljazeera.com/news/2022/3/29/ghana-lawmakers-pass-
contested-tax-bill

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levy-faqs/

8. New data on the e-levy in Ghana: unpopular tax on mobile money

transfers is hitting the poor hardest | ISSER UG. (n.d.).
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