Even before the Electronic Transaction Levy (E-levy) goes into effect next month, data shows that the mobile money platform lost over GH10 billion in value between November 2021 and January 2022, raising severe doubts about the new tax’s potential to generate the expected income.
According to the Bank of Ghana’s Summary of Economic and Financial Data (March 2022), the mobile money platform, which is the country’s largest payment system network and is seen as the main driver of financial inclusion, saw its transaction value drop to GH76.2 billion in January 2021 from GH86.1 billion in November 2021 (the month the E-levy was announced), a drop of GH9.9 billion. Since its inception, the platform has never seen such a massive drop in value in the space of two months inside a year.
Aside from the decrease in platform value, the total number of transactions decreased by 24 million in January 2022 compared to November 2021. During the same time period, the number of active agents declined by 7,000, while the number of active mobile money accounts decreased by 600,000.
All of these drops since November 2021, when Finance Minister Ken Ofori-Atta announced the E-levy, led to one conclusion: users of the mobile money platform are not ready to pay the planned tax and may have reverted to cash choices. Meanwhile, that is the platform from which the government intends to collect a portion of the E-levy.
In an interview with the B&FT, Dr. Vera Fiador, a senior lecturer at the University of Ghana Business School, agreed that the E-estimated levy’s GH7 billion revenue objective will not be met, owing to consumers’ unwillingness to utilize the mobile money platform even before the tax’s implementation on May 1, 2022.
“The chances are good that the mobile money revenue objective will not be met. According to current events, most people who can live without mobile money will hive-off by the time the taxes is ready to be implemented. The overall impact on small businesses will be enormous, and we can expect to see a lot of cash transactions in the near future. People will stroll into a bank, cash their money or use an ATM to pay over the counter,” she said.
She expressed concern that the poor will face the brunt of the new levy, given that the mobile money platform is their sole means of making financial transactions.
“Looking at the demographics, who are the people that have no other option but to utilize mobile money?” Those who are at the bottom of the pyramid. As a result, we are, in a sense, penalizing the poor. All of the others have options, such as checks, but the poor have none other than to utilize mobile money. I’m concerned because we’re about to erase all of the progress we’ve made over the years, making the poor even impoverished. “The cascading impact and the element of inequity is a little concerning,” she remarked.
The E-levy has been reduced to 1.5 percent, according to the Finance Minister, and will take effect on May 1, 2022.