- urges exclusion of remittances
Senior Lecturer, Department of Economics, University of Ghana and Board Member-Bank of Ghana (BoG), Prof. Eric Osei Assibey, has indicated that though the proposed Electronic Transactions Levy (E-levy) in the 2022 national budget has the tendency to derail government’s digitalisation and financial inclusion agenda, it is a necessity considering government’s fiscal situation at the moment.
With the current situation where three items in the budget – interest payment 31 percent, compensation 30 percent and statutory payment 14 percent – consume about 75 percent of the inflow, more revenue must be raised to keep the government machinery running.
According to him, if government is unable to raise revenue to address its current precarious situation, the expectant economic growth will not come; jobs cannot be created; and infrastructure development will be a mirage, hence making the E-Levy a necessity to bring in some revenue.
“Adopting digitalisation and digital means of doing everything is not easy for people, and so anything that discourages them means they will find alternative means of doing it – but we also have to look at it from the current fiscal situation of government.
“The current fiscal situation of government is nothing to write home about, because we have debt to GDP hitting almost 80 percent, huge risk to fiscal sustainability and macroeconomic stability. But if government is unable to finance these debts and get money to invest in infrastructure, among others, it will work against the economy,” he said.
He however urged government to reduce the current proposed 1.75 percent to 1 percent, or at least 1.50 percent in order not to overburden the public and lead to a situation where they are forced to resort to alternative means.
He made these remarks at the Chartered Institute of Supply Chain Management-Ghana (CISCM), National Business Scan Lecture 2021, held under the theme ‘The effective ways of implementing the 2022 national budget to gain value in the midst of the global supply chain crisis’.
Remittances must be excluded
Touching on remittances, he indicated that over the years it has increased significantly and can be equated to 7.4 percent of GDP as indicated by data, and has been a very important source of revenue to the state – with most of these inflows helping in infrastructure development, establishment of businesses, payment of school fees, among others.
For this reason, he added, remittances should not be included in the mix of items to be taxed under the E-levy, as it has the potential to reduce inflows or promote people resorting to irregular means of funds transfer.
“I am not sure about the current status of this, but I have heard from some sources that it has been removed – which I welcome as good news, because it plays a key role in our national development. Remittances tend to create jobs for people in the construction sector, help to set-up small and medium scale enterprises to participate in economic process and pay school fees, among others.
“So, it is critical in closing our financial and savings gap; and anything that discourages people from doing so will be detrimental to the growth potential of this country,” he said.
