The E-levy bill: Is there a way out?

The E-levy bill

Recent data from the Ministry of Finance indicates that as of end November 2021, Ghana’s public debt to GDP ratio stood at 78.4 percent. This figure, according to the International Monetary Fund (IMF), indicates that Ghana’s debt-to-GDP ratio has exceeded the general sustainability threshold level for middle-income countries.

As such, the Fund has classified the country as a high-risk debt distress country (2021 Article IV Consultation).  In a related development, Ghana’s credit rating has also been downgraded by Fitch Ratings from ‘B’ ‘to ‘B-’. This negative outlook, according to the agency, reflects the country’s loss of access to the international capital market – as most investors regard Ghana as a highly risky country for investment.

In response to this, government plans to look within by focusing on domestic revenue mobilisation to support various initiatives like the You-Start entrepreneurship programme. One of such revenue measures is the introduction of ‘Electronic Transaction Levy’ (E-levy). By this levy, every electronic transaction covering mobile money payments, bank transfers, merchant payments and inward remittances will be changed to an applicable rate of 1.75 percent.

Indeed, the Ghanaian digital industry is gaining enormous grounds in the economy – with mobile money operations spearheading this evolution. Evidence from the Global System for Mobile Communication report indicates that the number of mobile money accounts surged by 12.7 percent globally in 2020 – a development in which Ghana is not an exception.

Hence, it is justifiable for government to tap into this booming industry to generate revenue for the country. On the flipside, government has also been promoting a digitalisation agenda in recent times. Therefore the E-levy could definitely defy this digital inclusion motive by the government.

Who are the Losers and Gainers?

With all the deliberations on E-levy policy ongoing across the country, it is unclear whether the policy will benefit Ghanaians or not. On the part of government, according to the Finance Minister, “The E-levy will catapult Ghana into becoming an independent nation without aid”. He has also noted that for the country to stop relying on external sources such as the IMF, the E-levy is the way out.

With similar policies unsuccessful in other African countries, for the likes of Kenya, one wonders if this policy will be the game-changer for Ghana. All the same, it is obvious that the GH¢6.9billion estimated from the levy, if successful, can support some of the stated initiatives by government.

However, the main challenge will be judicious usage of the revenue generated. What Ghanaians want to see is transparency in how the taxes they pay are spent. On the side of ordinary citizens, the E-levy comes as an additional tax burden on their pockets.  Aside from the plethora of already existing taxes (both direct and indirect), Ghanaians are also paying a 1 percent cost of all mobile money transactions made. The introduction of the E-levy will extend this cost to 2.75 percent. Definitely, it is the ordinary citizen in the country who is likely to bear the brunt of this policy.

The Early Sign from E-Levy Outcome

It is quite fascinating that since the announcement of this policy during the 2022 Budget Statement reading in Parliament, consumers have also quickly responded to its negative sentiment. Data from the Bank of Ghana’s Summary of Economic and Financial data (January 2022) indicates that both the total transaction value and volume experienced a reduction in their rate of growth after the budget reading in late November 2021.

As of December 2021, growth in total transaction volume dropped to 10 percent from 11.3 percent in November 2021. In the same period, growth in total transaction value, according to the same data, recorded 3.5 percent in December despite a 14 percent and 13.6 percent growth in November and October 2021 respectively.

This recent change in consumer behaviour brought about by just the announcement of the levy should signal policymakers about the likely impact of the levy. Appetite for online banking or other digital platforms is likely to dwindle, and this will surely reduce the value and volume of transactions. As such, the GH¢6.9billion estimated revenue from the levy may not be generated. Therefore, what can government do to generate more revenue from / apart from this levy? Are there untapped avenues for government to explore in raising the needed funds to support its budget deficit? Definitely, there is always a way out!

What is the Way Out?

It makes economic sense for a developing country like Ghana to tap into its booming sector (in this case, the digital industry) to raise more revenue for development purposes. However, concerns raised about the levy have it that the 1.75 percent levy is too high and ambitious for the public to bear.

Government can implement the policy by setting the rate at a level in which the consumer will not feel so much of its impact. Such a level should conform to their elasticity of demand. Thus, people will respond sharply to demands for electronic transactions when an economic factor causes the price to change. In this case, a huge rise in the cost of electronic transactions will definitely cause a reduction in its patronage.

A range (for example, 0.1 – 2.0 percent) could be established. Within this range, government can periodically review and set up a new rate based on current economic conditions. A rate of 0.5 percent could probably be the starting point in this regard. This will moderate the levy’s economic impact on the pockets of citizens.

Moving on, why should an ordinary Ghanaian citizen be taxed while some foreign investors are exempted from paying taxes to the country? Do tax exemptions attract more investments into this country? And what has been the effect of tax exemptions by government on the number of foreign investments in the country? It is a well-known fact that tax exemptions have been used by government to lure foreign investors into this country.

The rationale for these exemptions, in theory, is acceptable; but it is not happening in reality. What we are experiencing now in the economy are incessant capital flights, over-exploitation of the local labour market and the like after such investors enjoy the exemptions. It is time we eliminated these exemptions and rather streamlined our tax system.

Government should fast-track its digitalisation agenda to reduce human interference in our tax collection system. In addition, passage of the tax exemption bill is critical in this regard. Parliament must pass the bill early this year, as promised in the 2022 Budget Statement. This will rationalise the current exemptions regime to raise more revenue for government.


In brief, the digital industry in Ghana is indeed flourishing, and is hence a potential source of revenue generation for government.  The E-levy can greatly raise revenue from this industry if it is gradually implemented. However, it is the citizens who will definitely lose when implemented at its current state. In this regard, their plight should be considered by setting the rate at a level that will moderately affect them. Furthermore, the tax exemption bill is long overdue and must be passed as soon as possible. This could widen the tax net and raise more revenue for this country.

>>>The author is a Research Assistant at the Institute of Economic Affairs (IEA). He can be reached on [email protected] or [email protected]


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