E-Levy: Improving the communication and implementation

Revenues during 2020/2021 went down considerably because of the slowing down of economic activities as a result of the COVID-19. At the same time, government, in order to keep the country going, did incur some expenditures on the free water, the free electricity. These were the unavoidable expenses that the government had to make.

Addressing traditional leaders from Dzodze in the Volta region on Tuesday, February 1, 2022, President Akufo Addo said the novel tax is the catalyst Ghana needs to create more jobs.

He continued: "These are the efforts that we are now making which are being resisted by the opposition, but we will try and close the gap. That is the reason it has become necessary for us to use these measures like this famous tax which has caused so much unnecessary disputation; nevertheless, we would continue."

That the time is now for the country to look inward to raise money to fund its economic growth and development and not depend on foreign grants, loans, and the stranglehold of rating agencies, which may not be sustainable in the long term is not lost on even the most ardent critic of Ghana’s current growth story.

Complication

Emerging economies like ours face a trifecta of challenges in forging a path of growth in a post-covid environment. Inflation is raging globally as supply chains unwind with the pandemic receding, oil prices inching northwards and geopolitical maneuvering takes centre stage.

Locally, gains made in reaching the central bank’s target inflation band have reversed as pump prices are poised to break the eight, further diminishing household disposable incomes. The sovereign debt crisis is next. With debt sustainability thresholds breached due to rising costs of debt and poor profiling, Fed hikes on the horizon will only exacerbate our debt situation with an unstable Cedi.

Citizen resistance to fiscal consolidation is the third in this triumvirate of challenges. The request for more expenditure in infrastructure, healthcare and education is at an all-time high yet the citizenry is unwilling to burden share. This attitude owes in part to perceived profligate spending by government officials, self-perpetuating corruption, unwholesome tax exemptions, and misappropriation of tax funds.

The citizen whilst agreeing more contributions can be made (Yes, we need to widen the tax net) also disagrees the contribution should be made (Current collections when used judiciously can solve our problems).

The fourth prong of complication emerges in the shape of Ghana’s hung parliament. The opposition parliamentary party is hellbent on frustrating government business. An accusation is borne out of the consistent resistance to logical open debate on the e-levy, stiff-necked resolve to scuttle consultations to reach consensus and finally the calls to invite the IMF just for equalization. Pure politics at play.

Government communication so far on the E-levy has been abysmal at best. Ranging from threats of the downright capitulation of popular government programmes to apocalyptic tales of economic degeneration by party communicators and some members of parliament. Whilst some invoke emotional/patriotic reasons to accept the levy others simply fumble in explaining the basic modalities of its implementation.

Solution/Assumptions

As it stands on Monday 7th February 2022, the general information given by the Finance Minister indicates Telcos pledge to drop their charges by 25% should the E-levy come into force whilst government is willing to charge 1.5% instead of 1.75% on applicable transactions. This presents an opportunity for a PR coup, the inability to utilize which is puzzling for any keen watcher. Currently, Telcos (excluding 1) charge 1% for sending funds and another 1% for withdrawals. That is a simple 2% rate. Agreeing to a 25% cut translates to a 0.75% charge on both sides of the transaction, a 1.5% overall charge. Adding the government's 1.5% takes the new total charge to 3%. We pay 2% now and with the introduction of the E-levy, we will pay 3%. Yes, the E-levy has a 1% impact on the user. The same 1% the reasonable Ghanaian majority has requested for weeks.

An information blitzkrieg highlighting this development through infographics on social media, local language radio stations and the ongoing townhall session will do. The plank of this message is that Telcos are giving up 0.5% of their charges to government to mitigate the user’s impact of 1%. This is easy for the reluctant mind to contend with and accept before the barrage on civic responsibility is unfolded. Next on the info blitz is clear communication of the implementation modalities, including a slate on what new charges will be on sample transactions.

A host of exemptions have been listed yet the message remains unheard due to propagandistic fog. So far only 2 government communicators, Honourables Fati Abubakar and Ben Ayeh have been the best spokespersons on explaining the E-levy and its modalities on some monitored Twi stations. Provide the opportunity for other communicators to learn from these persons and mandate these 2 to ride the Akan airwaves for key current affairs programmes.

It is proposed that the Ministries of Finance and Communication re-engage the Telcos to consider applying their overall 1.5% charge on only withdrawals. This simplifies the implementation of the levy as the 1.5% charge on sending funds goes to the government whilst the other 1.5% withdrawal charge goes to the Telco.

This withdrawal charge encourages users to keep funds in their wallets rather than incurring it, thereby disabling the argument that the E-levy is against the cash lite agenda. The Telcos gain in this arrangement as users retain more funds on their platforms; the same funds from which they willingly pay interest!

This government must get the 2-year-old Tax Exemptions Bill over the line (It deserves a certificate of urgency over the E-levy). Something should be done publicly to demonstrate expenditure is being reined in instead of a 20% cut announcement whilst the strides chalked in fighting corruption through digitalization should be trumpeted so progress can be appreciated.