The eCommerce Association of Ghana (eCAG) has said the new Electronic Levy (E-Levy) on electronic transactions announced by Finance Minister Ken Ofori-Atta in the 2022 Budget will have dire consequences for the entire digital finance ecosystem and government’s own digitalisation agenda rather than gains.
The Finance Minister announced a 1.75% E-levy on all electronic transactions in the country, including mobile money, online shopping and other digital financial transactions. The intent, according to the minister, is to rope the informal sector into the tax net – as a greater chunk of business transactions in that sector has been found to take place digitally due to COVID-19.
But in a statement signed by its Executive Director, Paul Asinor, eCAG said: “In as much as we – as the industry association of Ghana’s online retail – are not against the need for government to find creative ways of generating revenue to administer their mandate, we wish to draw their attention to some of the negative impacts that this new E-levy is going to have on e-commerce and other affiliated industries in Ghana”.
It noted for instance that the levy has a potential for eroding all the gains made by government’s digitalisation agenda, and is a major u-turn to government’s vision of a cash-lite economy because it threatens to send the largely unbanked population back into “financial exclusion”.
eCAG also stated that the levy will take a negative toll on the use of digital payments and take the economy back to the ‘cash is king’ era – adding that it will also slow down the development of e-commerce in Ghana as most payments today are made through mobile wallets and fintech platforms.
The return to increased cash transactions in particular, the statement said, will also cause loss of jobs in the fintech industry and compromise the safety of delivery riders, as they will become potential targets for armed robbers.
According to them, tax threatens to cause a reduction in online sales resulting in tax reduction to government – which defeats the whole purpose of shoring-up tax revenue via the E-Levy.
“We therefore seek as a matter of urgency to engage with the Ministry of Finance and all other relevant stakeholders to discuss this E-levy, its impact on online businesses and jobs; then have another look and possibly reduce or even suspend it,” it said.
eCAG also assured its members and the entire eCommerce community in Ghana that: “We will continue to promote and grow online retail and boost confidence in the sector. We understand that after COVID-19 your focus is business recovery, and we seek to remove all administrative burdens which may impact adversely on this.”
Meanwhile, government only met industry players for the first time about the E-levy two days after announcing the tax. The meeting was to discuss the implementation modalities come January 2022.
It will be recalled that following COVID-19 all players in the ecosystem actually reduced and/or waived some service charges just to cushion their customers who resorted heavily to online transactions. It is therefore ironic that while industry players are giving rebates due to COVID-19, government is rather introducing a tax way bigger than the existing service charges due to COVID-19.
Meanwhile, Parliament is yet to debate the E-levy and the entire budget; and the Minority in Parliament have registered their intention to “vehemently resist” its implementation.