Government's so-called innovative E-Levy causing more harm - ILAPI

Policy think tank Institute for Liberty and Policy Innovation (ILAPI) has opined that the introduction of E-Levy has come at a time when businesses are still recovering from the shocks of COVID-19.

The research-based center said the levy was introduced at a time when there were existing taxes.

The Institute said these taxes are usually passed on to consumers.

“Of course, businesses will pass the cost of E-Levy on final consumers by raising prices.”

ILAPI was responding to the mid-year budget review presented by the Finance Minister.

It stated that despite the revenue targets of the government, it relied on taxation as a post-covid economic recovery policy by introducing the COVID-19 Levy of 1% on all taxable supplies.

“This has increased the effective tax rate on taxable supplies to 19.25%.

"The Government has also increased the VAT flat rate to 4%. In addition, Government introduced sanitation and pollution levy of 10p per liter of petrol/diesel and 20p liter petrol/diesel as energy sector levy.”

Typically, most taxes are passed on to final consumers. For instance, some businesses pass withholding tax burden on consumers in the form of high prices. It is not surprising inflation has skyrocketed to 29% in June 2022 representing the highest rate since December 2003, worsening the woes of ordinary Ghanaians. Sadly, the salaries of most consumers have not been adjusted to accommodate inflation. Therefore, this phenomenon has negatively affected consumers’ purchasing power.”

It added, “Though the E-Levy is claimed by the government to be an innovative way of raising revenue to the, it appears it has added additional burden on producers and manufacturers, who in turn, have passed the tax burden on final consumers in the form of high prices.”

On inflation, the Institute said “In conclusion, the high inflation we are witnessing today could partly be attributed to the new taxes the Government has introduced over the years while hiding under the effect of the Russia-Ukraine War. Apart from the Government focusing on revenue generation, it should also look at measures to ease the cost of doing business.

To fight inflation, it is therefore imperative for the government to recalibrate the tax codes and subtly change the tax system to facilitate business growth and SME transition for economic development. To do this, businesses would need fewer tax codes and taxation should be the one that should drive for businesses to thrive and not to take enterprises out of business.”