E-Levy generating revenue for development; not double taxation nor tax on capital

BY: George Obeng Takyi

The introduction of E-levy by the Government of the New Patriotic Party in the 2022 budget as a novelty of raising tax revenues to support government agenda for the development of the country with two strategic objectives; scaling up employment generation for our teeming youth and the construction of road infrastructure network has occasioned varying views and interpretations.

It is therefore important to address and educate the public dispassionately.

E-levy is not anything bad and is not going to create any new burden or cost to the people. It will give to the people more benefits, primarily in employment and road construction and other sectors than expected.

The levy is coming from the world of technology which has bestowed on society innovation, creativity and market discovery. The innovation through research is coming out with new ways of doing things in all our economic engagements. Through this people become creative using technology in an innovative manner to be more efficient and dynamic to come out with variety of products; goods and services at reduced cost.

With variety consumers have choice to be made from different products efficiently developed at competitive cost. The new development through technology has also encouraged exchanges in a virtual world doing away with physical products. Doing away with physical products and objects implies taxes on such products are also avoided with government losing tax revenues to finance public expenditure.

Secondly the advent of technology and innovation come with externalities (negative/side-effect; like global warming and climate change) which is cost to society to be financed from the public purse. The question is how do we finance and make-up of the loss in tax revenues and the externalities embodied in the technology and innovation?

The technology and innovation ensures efficiency in production for reduced cost that inures to the benefit of consumers as additional income. The E-levy then seeks to take from consumers’ part of this savings and revenue to finance the externalities and lost tax revenue. For example, in the postal services one may need a postal box, writing pad, envelope and stamps to write a letter and, take transport to post a letter. Today with email a letter is written and posted through the internet with ease at one’s comfort zone, saving time and money.

The taxes on the postal box, paper, stamps, envelope and fuel are avoided. Moreover, monies were sent to relations through post, drivers, agents and philanthropists at cost directly and indirectly. With mobile money transfer the costs of engaging agents to carry, transport or send money physically to our love ones and the risk involved are avoided. Savings in time and inconveniences and financial benefits are significant enough for consumers of the product to pay something for the unavoidable externalities. Part of the savings made in using electronics and technology devices is to be paid through E-levy to ensure security in the electronic transactions.

Is this new E-levy imposing any additional cost to consumers? No it is just a contribution of the part of savings and benefits enjoyed by the consumer taken to finance the externalities embedded in the technology and innovative products consumed. The demand for the electronic and technology products, electronic wiring of monetary resources, is expected to be inelastic because the benefits far outweighs any envisaged cost to consumers and consumers may want to be part of the new order of technology world. The savings in time and avoidance of armed robbery, middlemen absconding with moneys, tussles and ordeals one may go through, is worthy enough to stay with the technology than to go for traditional ways of doing things. The old ways won’t be attractive to venture any longer.

E-levy is not double taxation as claimed by some people. It is not tax on capital nor over ambitious revenue module to over tax our people. E-levy as indirect tax is event and transactional tax. Each stage of consumption in any economic engagement in the demand and supply chain has its separate benefit on which levy is paid. Transferring money through mobile money is the event or transaction under consideration from which benefits are enjoyed and cost saved if the transfer has been in a different way.

The purpose for which the transfer is made does not come into the equation and is not the transaction. So if the money transferred is for the payment of school fees, buy capital equipment, sponsor a business enterprise or any other economic activity, it is not the activity that suffer the tax but the means of using the transfer medium that save you all manner of ordeal, risks and inconveniences.

The source of any money or income on which you paid a tax earlier is a different event and engagement from the next event or engagement of using the money or income. The new engagement of expending the money or income is another transaction and event of its own purpose, object or interest.

Expending any income on which tax has been paid earlier to acquire and enjoy a new product (good or service) and paying tax thereon does not constitute double taxation. There are two issues here; first income earned from economic activity like employment, business or investment on which income tax is paid as direct tax.

The second activity of acquiring a product (good or service) incurs consumption, or expenditure tax which is indirect. Any person engaging in any economic activity as employment, business or investment is exploiting economic resources of a country, society, to earn income directly for his good and the person has the obligation to contribute to the same society he exploited to cure the ills created from the exploitation.

This ensures the maintenance of security and wellbeing of the people. Persons who consume any product pays indirect tax as contribution of solving the externalities coming from the production of the product consumed.

E-levy as indirect, consumption and expenditure tax is paid to cater for the externalities coming out of technology development. The tax does not require the filing of tax returns for assessment. Indirect tax is not paid on the basis of the level of your income but on the bases of your desire to consume a product. The more your ability to consume the more you pay and the more you pay the more you support the needy.

Most social interventions come from such taxes which support the needy most. Through indirect taxes citizens accept the civic responsibility to contribute towards the building of their society.

To give out exemptions is depriving the people in lower income bracket their right to own their country in their own small way. To provide any threshold or exemption is to encourage tax avoidance. People can manipulate the system to escape the payment of tax and dodge their civic responsibility to own the state and provide for its security.

To achieve the purpose of owning the state, indirect tax rate should be reasonable to rake in every person into the tax net rather than exempting them. Indirect taxes not being value added, are imposed generally to prevent the practice of avoidance and evasion and the tax simplified by not requiring filing of returns for assessment. Any threshold or exemption gives way for manipulation to avoid and evade the payment of the tax.

It is worthy to note that E-levy is an indirect, consumption and expenditure tax on electronic technology to conduct economic transactions that simplifies and save consumers from laborious and bitter ordeals.

The tax is on savings made and not additional cost, double taxation or tax on capital. It is tax to cater for externalities like global warming, climate change and crime.
Do we borrow to pay for these ills?

The writer, George Obeng Takyi, is the Member of Parliament for Manso Nkwanta Constituency.