April 5th, 2022 at 10:49 am

Ghanaians face punishing new levy on electronic payments

From may, a 1.5% price will hit cellular phone transactions above a hundred cedis. In the country’s bustling markets, people are irritated and nerve-racking.

At her store in Accra’s sprawling Kantamanto market – one among the largest for second-hand clothes in west Africa – Cynthia Bentum sits on the pinnacle of a mound of products imported from Guangzhou and Manchester.

Many who trawl through her garments are buyers themselves and pay through their mobile phones, so the decision by Ghana’s government this week to tax all digital payments has left Bentum, forty-nine, frustrated.

“The principle mode of payment is MoMo,” she says, regarding the mobile money service through MTN, the biggest provider in the country. “Why board cars to come back and pay when mobile money payment makes it simpler?

“I’m now not in opposition to taxes however I think this specific tax is senseless. To begin with, look at the price involved in importing items into the country. The freight charges are outrageous. Now they want us to pay an e-levy – for what? This is going to have an effect on me critically and I may additionally grow to be losing customers, with a view to eventually affect my business.”

Many in Ghana feel similarly bitter. Kofi Brobbey sells spare parts from his store close by. After being robbed he started out the use of mobile money more often, in particular, to shop for fuel. “I don’t want to pay with MoMo anymore because I’m going to be taxed on top of the price for the fuel. Does this make sense at all? Where is the digitalisation they promised us? We’ve been deceived, and now the reality is dawning on us.”

E levy ghana charges on mobile money

An e-levy adding 1.5% tax on all digital and merchant payments, bank transfers and inward remittances of more than a hundred cedis passed in Ghana’s parliament on 29 March and could come into effect in May. It has sparked giant anger approximately the effect on people’s earnings and warns it could reduce the usage of mobile payments, which can be extremely popular in Ghana.

The government said the levy will help raise 6.9bn cedis this yr, a small dent in the country’s £39bn public debt, however, enough to avert the need for a loan from the International Monetary Fund, in line with analysts. yet the tax has been widely unpopular, coming at a trying time for millions of human beings and focusing on developing complaints of President Nana Akufo-Addo’s government.

Ghana’s economy, often lauded by officials as one of the most thriving in Africa, has confronted big challenges in current years, in part as a result of the impact of the pandemic. Inflation reached 15.7% in February, the best since 2016, fuelling a cost of living crisis. Ghana’s currency has depreciated by 20% during the last year.

In a state of the nation address on Wednesday, the president acknowledged the challenges. “The Ghanaian people are disturbed about the economy, the cost of living, income levels … we are aware that we are in difficult times, and we are addressing the situation.”

The government has said the policy will widen the tax base in Ghana to include the informal sector, where around 85% of Ghanaians are employed. But it has been roundly condemned by means of the opposition, trade groups and civil society, who say it’ll hit Ghanaians already suffering, and risks reversing the trend towards digital transfers.

Ghana’s government has closely promoted mobile and digital payments, spurring a quick-growing industry. Financial technology firms and startups have attracted tens of millions of dollars in funding. Some commentators have expressed concern the e-levy could dent the sector.

Mobile phone payments have turned out to be ubiquitous in a country in which only 42% of people have a bank account. The Covid pandemic has only entrenched its significance. In 2020, the total value of transactions through mobile turned into more than 500bn cedis, and extra than doubled the following year.

Mavis Bampoe, 51, founded the vision Montessori school in Accra 10 years ago. “before coronavirus, I used to have parents queueing at the cashier’s cubicle to pay school fees,” she says. “Then parents transitioned to making mobile payments that were faster and more convenient”.

But they have already begun reverting to cash payments in recent months, she says, since it became clear that the e-levy was coming. “If a parent wants to pay fees, they must first transfer money from their bank account to their mobile money wallet. That attracts a charge from the telecoms companies, plus another 1.5% of the e-levy.

“After the money has been transferred into their wallet, that parent will now have to send it in to my school’s wallet, and that is going to attract another telecoms charge, plus the 1.5% e-levy.”

Franklin Cudjoe, director of Imani Africa, a policy thinktank, says people in the country understand the challenging economic times but the policy still feels unacceptable. “It’s just difficult for people to understand why it’s being introduced now. Then also the rate itself is too high. It should have been closer to 0.5%.”

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