Drop E-Levy further to 0.5% — Prof. Quartey
THE introduction of the Electronic Transfer Levy (E-Levy) this year as an additional revenue measure to shore up domestic revenues has failed to meet the projected targets.
Before its introduction, experts and the general public had kicked against it using many reasons, including its impact on the efforts to deepen financial inclusion, additional cost to low income earners and the fact that a similar revenue measure had failed in other jurisdictions.
As a result, many proposals to make it attractive were deduced but the government was still adamant although it reduced the rate from the proposed 1.75 per cent to 1.5 per cent which many still felt was too high for a start.
To get the government to listen, the Director of the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana, Prof. Peter Quartey, has called on the government to further review the E-Levy to encourage compliance among Ghanaians.
He explained that a revised collection rate to 0.5 per cent coupled with a GH¢100 threshold and removal of all other concessions would enable the government to mobilise the targeted GH¢2.24 billion from the levy in 2024.
This, he said, should be considered before Parliament approved the new amendments made to the levy in the 2023 Budget Statement and Economic Policy.
Addressing a 2023 budget review forum in Accra, the ISSER Director said taking deliberate measures to make the levy cheaper would encourage more Ghanaians to contribute to its success.
The levy has so far yielded GH¢319.14 million between May and September this year.
The amount, mobilised in five months, was about 5.03 per cent lower than the GH¢336.10 million expected from the levy for the period under review.
The government in the 2022 mid-year budget revised the revenue target for the levy from the initial annual projection of GH¢6.96 billion to GH¢611 million.
Before realising its projected amount for this year, it had set a fresh target in the 2023 budget to generate about GH¢2.24 billion from the levy next year.
The government subsequently proposed a reduction in the levy rate from 1.5 per cent to one per cent of transaction value and removed the daily threshold.
Narrow revenue gap
Prof Quartey stated that a revised collection rate to 0.5 per cent, intensified education and accompanying measures would encourage compliance and narrow the revenue generation gap recorded for the period.
He explained that many Ghanaians were evading the levy because of the high rate, limited education and loopholes associated with the structure of the levy.
“E-levy rate should have been reduced to 0.5 per cent while maintaining the GH¢100 threshold but scrap all other concessions.
“The levy at its current state will further decline electronic transactions as the threshold is removed and rate decreased is still high. The projection for the year is over ambitious,” he said.
Prof. Quartey added that the 2023 budget was expected to restore macroeconomic stability under an IMF programme.
He said key factors expected to be addressed by the budget included enhanced revenue mobilisation, ensuring fiscal discipline, addressing debt challenges, restoring macro stability and confidence through an IMF-backed programme.
The revenue-enhancing measures, he said, were increase in the value added tax (VAT), a review of the E-Levy, ensure tax efficiency, non-tax revenue, the removal of benchmark values and other exemptions.
He explained that the increase in the VAT and cost-cutting measures in the public sector should be complemented with a reduction in the size of the government to achieve the desired outcome.
Build resilient economy
Going forward, Prof. Quartey said it was expected that the programmes outlined in the 2023 budget would restore macroeconomic stability and build a resilient economy.
To achieve that, there was the need for fiscal consolidation — raising revenue and reducing expenditure, including reducing the size of government, he added.
“The central bank should increase the supply of forex and clamp down on the operations of the ‘black market’ and also put in measures to sanitise that market,” he added.