Kwaku Dompreh

Getting things done.

E-levy a source of revenue boost for government and possible ramifications for all

3 months ago
16

e-levy

Everyone everywhere under any country’s jurisdiction is subject to pay taxes. 

“Rain and Taxes are inevitable in life” - Albert Jerry

Taxes have proven to be the panacea model for funding expenditures of government. In order to complete the next road infrastructure, keep the harmony in society through provision of social goods; amenities, subsiding cost of utilities, paying for security of a nation, ensuring the salaries of public employees & among many other supporting mechanisms expected of a government. These are all desirable portions of paying taxes. 

Talking about government expenditure without spreading the expenditure arms of Free SHS will be incomplete to ensure proper prognosis of a thorough analysis. The expenditure on education had been bloated by providing non-fee paying education for some 550,000 to 1.5million students since 2017 - 2022. This is quite remarkable feat not only in the history of this country but on the African continent, quite novel so to speak. Despite the gravitational force on government purse, this policy is more of a political fulfillment than economic justification in the long run. 

Positive fiscal policy outlook, every country needs to produce strategies to generate revenue aside borrowing. Not for toppings of revenue per se, but for investors who lend money to the country through bonds and capital market but to give confidence of payback of loans plus interest. Currently, debt -to-GDP is off the roof in the history of this country. While borrowing seems “fun” to most governments in developing countries. There are times when international lenders will run from specific countries and Ghana isn’t different at this moment in time. Hence, it has to prove with E-Levy paying back loans imminent and country’s financial outlook is promising to guarantee payback.

The panic among public sectors that government can’t pay salaries for months have been withered down considerably. This also echoes the fact that E-Levy can produce anxiety reduction outlook for employees in the country. 

Government seeks some revenue income stream close to GH 6.5billion annually to augment the pale revenue coffers, and the most promising aspect to fulfill such audacious goal is the burgeoning means of payment; Mobile Money (MoMo). Thus, scooping 1.75% taxes on each and every transaction above the GH100 floor threshold. 

The ramifications spreads across the width and breath of the ocean, literally. While, fisticuffs and absolute altercation have been witnessed in parliament, that’s the leas of the problems. Electronic and fintech transactions are expected to see a 25% drop () due to behavioral changes on the backdrop of E-Levy. Most pernicious of them is when transacting in huge sums, the percentage of charge seem negligible for smaller everyday transaction it costs much more prior to implementation. 

Job creation, a real stumbling block since most companies entering into the fintech space have to reconsider their decision which is less likely, but to cut down jobs to subdue the extra cost of operation is much certain. Besides, some MoMo agents won’t be spared either. Currently the auspicious industry was producing about 2.5million jobs, now this might see considerable reduction if the behavioral attitudes of less people using MoMo kicks in strongly; jobs will be lost most certainly. 

In every policy implementation there are checks and balances to curtail any adverse effects on the same people it was meant to support. The nuances of e-levy operations on electronic transactions is glaring enough to sound a lot of caution, but now that it has been passed by the legislative arm of government, little can be done to retreat the realities. The impacts can be ascertained in some months and years to come if it was a fiasco revenue generation strategy or an immense and substantive one.

There is no pick and choose, people reacts differently to costs either by taxes or associative cost briskness in business. The consumer or users almost always get the the cost thrown at them. To most of us, what we anticipate is for government using the revenue for what it was intended to do. Anything short of that will agravate the hurdles that most people face under current circumstances. The benefits will surely be matched with the cost and ramifications, you cannot choose one and leave the other.

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Kwaku Dompreh
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