- Can also derail financial inclusion agenda
Some tax experts have taken umbrage with the campaign by Minister-designate for Communication, Mrs. Ursula Owusu-Ekuful, pushing for taxes to be applied on revenue generated by telecommunication operators (Telcos) from mobile money charges – saying such a move will amount to double taxation and can derail the financial inclusion agenda.
One of the experts, Dr. Abdallah Ali-Nakyea – Senior Lecturer at the University of Ghana School of Law and Director Ali-Nakyea & Associates, maintains imposing a direct tax on revenue generated from mobile money (MoMo) charges will amount to double taxation; whereas imposing an indirect tax will defeat the financial inclusion agenda, as users of the platform will find transaction costs expensive and that will deter them from using it.
“When an income is taxed twice in the hands of the same person, then it means there is double taxation. So, if the mobile money charges are part of the income of the telcos on which they are paying tax and you tax them on it again, that will amount to double tax.
“Unless you are telling me that the tax you are imposing is a direct tax, then you don’t need to add the mobile money income to your overall income anymore or else it will amount to double tax. But the response is likely to be that we are imposing an indirect tax. But then again, we will question: is there not an indirect tax already called communication service tax?
“So if you want to impose indirect tax on MoMo charges, you are invariably increasing the communication service tax. And if it is an indirect tax, remember the telcos won’t be the ones to bear it. They are going to pass it on to consumers. So, you are going to make the cost of accessing the MoMo service higher; and that will work against the purpose for which the MoMo was introduced,” he told B&FT in an interview.
Also commenting on the issue, auditor with MGI Oak Chartered Accountants – Emmanuel Kotey, seconded the view of Dr. Ali-Nakyea; saying it would be wrong for government to apply taxes on mobile money charges, as the financial statements of telcos show they are already taxed.
“On the face of financial statements from the telcos, it would be wrong for government to tax the revenue generated from mobile money because it has been declared as part of the ‘other incomes’ and already been taxed. The tax authority cannot tax it again.
“If the tax authorities want to tax that income separately, they will have to take it out of the other incomes first so that it doesn’t amount to double taxation. Until there is a law that mandates tax authorities to apply taxes on the main income and other incomes separately, the telcos cannot pay tax on mobile money charges again,” he told B&FT in an interview.
One of the reasons the Communication Minister-designate feels strongly in making her point on taxing the revenues generated from mobile money charges is the money operators make from the transactions. According to her, in January 2021 alone, monthly transactions that passed through mobile money platforms amounted to GH¢81.3billion, yielding GH¢124.5million in transaction fees for the mobile money operators.
“If the state gets even 10 percent of that per month, that is GH¢12.5million. In my opinion, the transaction fees generated by operators from these huge traffic volumes on mobile money platforms ought to be taxed.
“I am not saying that individuals who send and receive mobile money should be taxed. The fees they pay to all the network operators for the service are revenue that the operators earn, and the state has to be interested in that and tax them,” Mrs. Owusu-Ekuful said during her vetting when she appeared before the Appointments Committee of Parliament.
But Dr. Ali-Nakyea disagrees with that position, saying taxes should not always be seen as a revenue generation tool but can be used to grow a promising industry to achieve a certain goal; hence, applying taxes on such an industry will negatively affect that course.
“I keep saying that taxes are not only for revenue generation. They can be used to regulate an economic activity or sector … but because you are the regulator and you see figures, you are likely to jump to the conclusion that there is money there and so it should be taxed. But finance analysis will help you to know that applying taxes on a certain activity can derail a course.
“So I am against taxing MoMo, because of the fact that the charges are already part of the income of telcos which is already taxed – unless anybody can tell me is not part of their income and so they are bringing it in. Secondly, if you tax it as indirect tax, then it is not the telcos you are going after; you are going after ordinary consumers because indirect taxes can be shifted or passed on. So, we would need to do a comprehensive analysis before implementing it,” he said.