Government has unveiled plans for a comprehensive overhaul of the Electronic Transfer Levy, commonly known as the e-levy. This move is part of the government’s Medium Term Revenue Strategy, aimed at revamping and optimizing taxation policies for greater efficiency and effectiveness.
The e-levy, which was introduced in May 2022, imposed a 1.5% charge on all electronic and mobile money transactions over ¢100 per day. The levy was initially designed to increase government revenue by extracting larger tax contributions from Ghana’s informal sector. However, in January 2023, the government reduced the tax rate from 1.5% to 1%.
One unique feature of the e-levy was an exemption threshold for transactions below ¢100 a day. Although this exemption remains in place for now, its real value has been eroded by inflation over the past year. The e-levy has been a subject of intense and polarizing public debates, with varying opinions on its impact on Ghana’s public finances and mobile money usage.
This comprehensive redesign of the Electronic Transfer Levy represents a forward-thinking approach to taxation in the digital age and aligns with the government’s broader strategy to modernize revenue collection methods while ensuring equitable taxation across different sectors of the economy.
The Medium-Term Revenue Strategy includes several other proposed reforms:
- Broadening the Withholding Tax Regime: The government plans to extend the coverage of the withholding tax regime to various tax types. This expansion aims to enhance taxpayer identification, facilitate more efficient tax collection, and simplify filing processes, especially for incomes within the informal sector.
- Streamlining Tax Returns: Measures will be put in place to streamline tax return processes and scrutinize the modified taxation system. These efforts are aimed at reducing tax avoidance and encouraging voluntary compliance.
- Reviewing Outdated Tax Categories: The strategy involves a thorough review of outdated tax categories such as stamp duty, income tax stamp, and vehicle income tax. The goal is to align these categories with current market dynamics.
- Enhancing Taxation of Rental Income: The government plans to ensure a fairer contribution from the rental income sector through enhanced taxation measures.
- Taxation on Gross Gaming Revenue (GGR): A significant step towards a more comprehensive and equitable tax structure will be taken by implementing taxation on Gross Gaming Revenue for industry players. Additionally, withholding tax on winnings will be introduced.
These comprehensive tax reforms is said to represent a concerted effort by the government to modernize its revenue collection methods, make taxation fairer, and ensure that tax policies are in line with the evolving economic landscape.