Rewinding to 2009, when MTN launched Cellular Cash, setting the tone for a digital revolution in Ghana that modified the Ghanaian manner of dealing with cash and monetary companies.
This revolution broadened, following comparable ventures by different telecom service suppliers like Tigo (now AirtelTigo) in 2012, and Vodafone (now Telecel) in 2015, promising a hop into monetary freedom, inclusion, handy and financial development.
However this intense swing in the direction of digital monetary companies hit a snag following the federal government’s introduction of the Digital Switch Levy (E-Levy) in Might 2022, which hit Ghanaian’s pockets.
The Start of Cellular Cash
Cellular Cash (MOMO) supplied a glimpse of progress, offering an digital option to ship, obtain, and hold cash on one’s cellular machine conveniently.
With 4 million subscribers throughout all networks in 2017, subscribers of cellular cash stood at 73 million on the finish of 2024, after a leap from 65.6 million in December 2023, enhancing monetary inclusion dramatically amongst various ranges of societies.
Per the Financial institution of Ghana’s information, transaction volumes jumped from 5.07 billion in 2022 to six.81 billion in 2023, affirming Ghana’s transfer away from money.
The Biting Tooth of E-Levy
In Might 2022, implementation of the Digital Switch Levy (E-Levy) got here into full pressure, by way of the Digital Switch Levy Act, 2022 (Act 1075) and the Digital Switch Levy (Modification) Act 2022 (ACT 1089), imposing a levy of 1% on digital transfers.
The E-Levy was charged by banks and cellular cash suppliers like MTN Momo, Vodafone Money, AirtelTigo Cash, Zeepay, GCB G-Cash, Yup Ghana and the likes.
Projected to reap income of GH¢2.24billion for the yr, the tax regime aimed to broaden tax base and court docket public contribution for growth.
Nonetheless, inside a yr of mobilization, the E-levy generated GH¢246.9million in income, accounting for less than 11 % of projected income.
Authorities’s projected tax in-take was a lot decrease than anticipated.
This was not only a in need of income, however a sign of a harmful shadow being forged over the cellular cash revolution.
Josephine is a scholar at Kumasi Technical College. Her monetary life revolved round cellular cash, particularly along with her on-line procuring actions.
“E-levy is my problem. There was a time I wished to purchase one thing on-line, checked my pockets, I really had the precise cash I wanted to purchase that merchandise, with prices.
“However as a result of I didn’t have more money for E-levy, I used to be not in a position to ship the cash to get that merchandise. So I used to be discouraged from utilizing Momo,” she stated whereas narrating her ordeal with a brand new regular that was launched by the levy.
MoMo transaction prices elevated on account of the levy, and shoppers discovered a tough hitting option to present their excessive sensitivity to this value change.
Individuals who’re economically susceptible are within the majority of these pushing again to money transactions to keep away from the extra value.
Margaret Agyei, a patron of cellular cash, has reverted to her conventional means of monetary transaction, utilizing the money programs, following the implementation of the E-Levy tax regime.
“The MoMo was useful. I may hold cash of any worth on it. However because the implementation of e-levy, sending 1000gh has turn into problematic as a result of I’ve to deposit greater than 1000gh or ship greater than 1000gh to the individual. So I ended. I somewhat desire they put it in an envelope and ship it by way of a automotive or parcel workplace,” she stated.
Margret’s U-turn, not solely water down the good points in monetary inclusion particularly of the poorest and most susceptible, but in addition threatens the digital monetary companies progress.
Financially strained people, like her case, varieties a part of a 25% drop in cellular cash utilization throughout the 9 months of the implementation of the levy.
In accordance with analysis by the GSMA, transactions under 100 Ghana cedis diminished by 19%, these between 100 and 200 Ghana cedis slimed by 28% and the discount was 48% for transactions above 200 Ghana cedis.
In distinction, money out transactions – that are exempted from the levy – have elevated 61% in worth and elevated year-on-year by 25% in volumes, indicating that buyers are returning to cash-based transactions.
Cellular cash distributors had been additionally exhausting hit by the scenario, shedding their transaction numbers.
Sammy has been working as a MoMo vendor for over a decade and reviews that E-levy impacted his work.
“At first, it affected me so much. As a result of we aren’t used to new issues. However later, individuals bought to grasp the explanation why it was launched. It isn’t some other transaction you do, you might be deducted. Nevertheless it was very unhealthy. It impacted negatively on my enterprise.
“I do lots of transactions. I can do greater than 100 transactions a day, it varies with time and event. By means of the introduction of the E-levy, the transaction was diminished so much. It diminished drastically, however individuals had been starting to grasp the idea of cellular cash,” Sammy stated.
Financial Penalties
An economist and monetary analyst, Dr. Evans Nunoo, discusses the long-term financial implications for Ghana if the development of reverting to money persists resulting from tax insurance policies just like the E-levy.
The diminished demand resulted in decrease taxes collected on cellular cash revenues, as in accordance with the GMSA, internet tax income for the federal government can be damaging – by virtually 1.4 billion GHS per yr.
Monetary exclusion, safety threats and inefficiency of the digital financial system are conferred implication of the persisting taxation aimed toward cellular digital transactions.
“We scale back monetary inclusion for the inhabitants we’re focusing on. And efforts to formalize the casual sector are jeopardized, slowing progress of monetary inclusion, particularly in rural areas the place monetary infrastructure is restricted.
“The development of reverting to money will even undermine the digital financial system and digitalization, as it’s going to scale back funding in fintech, thus, individuals will likely be discouraged to develop monetary know-how. And alongside that, restrict alternatives for digital entrepreneurs.
“Usually, tax income will lower. Identical phenomenon will arouse safety dangers and inefficiencies of the financial system as a result of individuals will run again to the money system, rising fraud, theft and different safety dangers.
“One other affect is the damaging affect on financial coverage. It will be a bit tough to trace the financial system and for the federal government to have correct knowledge for the correct financial system,” Dr Evans stated.
Potentials of the Promise of Reversal
It’s anticipated that the Digital Switch Levy (E-Levy) and different nuisance taxes will likely be abolished throughout the federal government’s price range studying in March 2025.
In accordance with the Minister for Finance, Dr. Cassiel Ato Forson, ongoing discussions purpose to make sure that scrapping these taxes is not going to negatively affect Ghana’s program with the Worldwide Financial Fund for monetary help.
The Minister assured that the levy can be cancelled in 120 days.
For customers of cellular cash, the peace of mind presents a glimpse of hope.
“The E-levy isn’t serving to. Individuals come right here and so they withdraw with out even figuring out what it’s. It’s good that there’s a preposition to cancel it. I hope such is efficient proper now. It can assist us, I imagine those that have made the U-turn to revert again to utilizing MoMo. I will likely be glad,” Isaac, a daily MoMo consumer stated, anticipating the federal government to expedite intentions to cancel the levy.
The federal government’s plan to cancel the levy opens a discourse on balancing fiscal accountability with digital development.
With classes from the e-levy roll out, Dr. Evans Nunoo is admonishing a robust want of steadiness for income assortment with the promotion of digital monetary companies, presumably, exploring various taxations.
“However any good switch system ought to have fairness and steadiness, be honest and equitable. There are some individuals who can do hundreds of cedis of transactions, which suggests, they’re in the next earnings bracket. Some additionally do much less, so categorize such individuals in a decrease earnings bracket. The taxes might be progressive to mirror earnings ranges.
“We will enhance public consciousness and transparency, educate individuals and create correct acceptance of tax regimes. The transparency regards the place the tax revenues are going into, that may encourage some individuals. Authorities ought to discover broadening the tax base. There was no must abolish a tax regime to create a brand new one and rely on it. Like within the case of highway tolls and e-levy,” he stated.
The Method Ahead
The E-levy, as demanded by many customers, doesn’t demand simply cancellation.
The problem lies in reigniting cellular cash’s attraction, significantly among the many economically susceptible populations.
Concerted efforts are important to whip up deserted customers, who averted cellular cash to keep away from the tax regime.
Economist and monetary analyst Dr. Evans Nunoo, mentioned measures to be applied to make sure that cellular cash utilization regains its constructive standing.
“Put up the levy’s cancellation, we should be guarded by the prevailing prices. For the agricultural folks we will remove transaction charges till we’re positive they’re again and breasted. Authorities ought to subsidize momo transactions for sure teams, like college students, market girls and so forth.
“We will additionally run a public training marketing campaign of the adjustments and the development to draw customers again. Stakeholders can increase cellular cash companies, like integrating momo into different companies, like saving accounts and the hyperlinks. It can encourage extra individuals to come back again or begin utilizing momo companies,” he stated.
E-levy phenomena is a deterrent story of the affect of insurance policies on improvements, significantly one which cares for the susceptible populations within the nation. Past that, there must be a strategic guideline that balances the search for digital and monetary inclusion and income mobilization
DISCLAIMER: The Views, Feedback, Opinions, Contributions and Statements made by Readers and Contributors on this platform don’t essentially signify the views or coverage of Multimedia Group Restricted.
Source link
