Mobile money has almost become the conventional form of financial service choice for both the informal and formal sectors with banks integrating and enabling cross transactions from mobile money wallets to banks and vice versa. According to the Deutsche Bank, statistics in January 2021 shows 39% of people aged 15 owned a mobile money account, in 2018 the share was only 13%.
Mobile money is playing an integral role by allowing savings to be invested in the local economy and boosting trade and job creation and bringing on board the informal businesses which have the potential effect of widening customer base.
The ease of use associated with mobile money platforms has increased financial inclusion and access to basic banking services compared to the traditional Banks. Mobile money serves as a savings platform and vehicle to transfer funds for both economic and emergency transactions. The introduction of mobile money has strengthened the formal and informal sector with transactional audit trail which serves as book keeping.
Currently in Ghana, mobile money provides the avenue for payments of broad range of services in both public sector (taxes, pensions and public services) and the private sector such as loan repayments (non-bank financial institutions) and other online businesses.
The emergence of the novel Coronavirus in Ghana in 2020 significantly impacted the mobile money industry and resulted in a rapid transformation in how some businesses operate, with more people adopting mobile money and linking bank accounts to mobile money accounts. Data from the State of the Industry Report on Mobile Money 2021, highlighted that in 2020, “the number of registered mobile money accounts grew by 12.7 per cent globally, with over 136 million added in just one year”.
This piece seeks to address the Politics of taxation highlighting the recent e-levy brouhaha on mobile money transactions and the ferocious uproar in Parliament with fist fights, all in the quest to resist the introduction of the policy.
Primary stakeholders such as users of Mobile Money have been on the forefront to raise concerns on government’s policy to implement the E-levy. There have been diverse schools of thought on the subject matter, with some perceiving that, such policies are retrogressive and retard Government effort of financial inclusion. Others have argued that the introduction of e-levy is a new normal rebuilding strategy.
It is also argued that the weaknesses in the financial sectors and inability of regulatory authorities to bring social media traders into the tax bracket has become a leaking pot to Government achieving its revenue expectation.
It is evident, the success of mobile money has shifted attention of most African governments as an avenue to broaden tax revenue (www.gsma.com).
The proposed implementation of the mobile money transaction tax is controversial and there is public outcry louder than ever against the policy. The quest to increase Government revenues domestically and the fall in commodity prices and Covid-19 have presented a challenge, where Government has to find innovative ways to bridge the revenue deficit in the budget.
This year-2022, the total revenue projected is over GH¢ 100 billion with tax revenue constituting 76.74% of the projected revenue out of which about GH¢7 billion is expected to be derived from the implementation of the e-levy. Notwithstanding the projected revenue expected from the e-levy, the risk of the implementation of the tax will negatively impact businesses and individual groups who patronize the service, which has the potential of eroding the gains achieved in financial inclusion to date and having a substantial effect on developmental goals (digitalization agenda).
African countries such as Kenya, Uganda, Cote d’lvoire, Republic of Congo have recently proposed the introduction of mobile money tax.
A Policy brief by the Africa Growth Initiative in 2019 presents the effects of taxing mobile transactions, as follows; tax levied on low-income earners that are sensitive to transaction costs may discourage the use of mobile phone-based transactions and encourage users to revert to cash transactions to evade tax. The rollout of the e-levy on mobile phone transactions may risk stalling progress on digitization, revenue administration and has the potential to reverse some of the financial inclusion and overall financial gains.
On the subject of digitalization, some critics have raised questions on Government commitment to the digitalization of the economy of which Mobile Money plays an integral part.
The digitalization of revenue collection by GRA and Pensions through mobile money can both widen the tax base and improve revenue collection. However, it is not unclear how the proposed E-levy policy will impact businesses and household, poorly formulated tax policy will have adverse effect on total tax revenues and can have behavioral effect on the consumer.
The question stakeholders ask is the impact of the taxes on the gains seen in financial inclusion and the attainment of the digitalization agenda of the Government.
Government needs revenue for developmental projects, the implementation of the e-levy is earmarked for projects in 2022.
Hitherto primary users of mobile money services will be burdened and there is the tendency of increase in cost of doing business.
The post Benjamin Yemoh writes: Politics of taxation; The E-levy brouhaha appeared first on Citinewsroom - Comprehensive News in Ghana.
Read Full Story
Facebook
Twitter
Pinterest
Instagram
Google+
YouTube
LinkedIn
RSS