A chevy of a levy

Chevrolet, (pronounced sher-vro-lay), is an American car from the stable of General Motors, (GM). Its short form is Chevy, (pronounced sher-vy). Interestingly, both its full name and short form are real words in Spanish and English respectively, with some fascinating connotations. According to the online Word Magic English-Spanish Dictionary, Chevrolet in Spanish means persecution. In English, the short form, chevy, means persecution as well, with synonyms such as torment, irritation, annoyance, nag, badger, heat, pursuit, chase, or harass.

Sometimes, it is spelt chivvy which means to obtain by small manoeuvres. Another meaning attributed to the word is confusion. It is also listed as a crossword-clue for an act of pursuing with an effort to overtake or capture. In short, it implies going after with the intent to catch.

Whatever meaning is adopted for the full form or the shorter version of the word, one thing is certain. It has elements of a pursuit, irritation, and confusion in it. The Electronic Transaction Levy (commonly known as Electronic Levy or E-Levy) proposed by the Government of Ghana seems to be one chevy of a levy, what, with all the confusion surrounding it and the schemes to push it down the throats of Ghanaians? Its discussion has even led to a nasty brawl in parliament. Now, you understand why I call it a chevy of a levy. It has already led to irritation, chaos, and disagreements.

The levy, pegged at 1.75 per cent on all electronic transactions in the informal sector, was proposed on November 17, 2021, by the Minister of Finance, Mr. Ken Ofori-Atta during the presentation of the 2022 budget. Transactions above GH¢100.00 will be affected and areas to be captured under the levy include the following:

• All inward remittances (which would be paid by the recipient)
• All person-to-person mobile transactions (which includes sending of funds to another account, payment for goods and services, payment of utilities
• All POS/Merchant payments.(POS means Point of Sale), that is, the place where a transaction takes place. It may be virtual or real.

The minister said the policy would not only widen the tax net but could generate about $1.15 billion to be used for the payment of contractors in Ghana. Besides, revenue from the levy would provide funds to support entrepreneurship, cyber and digital security; road infrastructure and job creation for about 11 million people in the country, as well as help reduce borrowing and the national debt.

He justified the introduction of the levy with the explanation that the COVID-19 pandemic has led to an increase in the use of digital platforms for transactions. That rationalisation is tantamount to turning the already impoverished masses into easy prey to make a quick buck.

The Government should be told in no uncertain terms that you cannot eat your cake and have it. Were we not told that Ghana was gearing towards a cashless economy, and that digitisation was the tool to achieve that? Why then should there be a tax on digitisation improvement? This ambivalence could be suicidal, defeatist, and counter-productive.

Truth be told, no nation can develop without relying on some form of taxation. Economic experts stress that Africa’s development is stifled by certain critical deficits which, if not addressed, would continue to impede the continent’s advancement. They include low access to healthcare together with poor service, high illiteracy rate as well as poor quality of education and inadequate energy supply to fuel industrialisation, add value to primary products, boost exports and reduce imports.

Without doubt, education remains the backbone of sustainable development. That is why the introduction of the Free Senior High School by the Government must be lauded. Though fraught with a lot of difficulties, it is a step in the right direction. It only needs fine-tuning which must be done with consultation, not unilaterally. With time, the benefits will be self-evident through the skills acquired and increased productivity among other things.

Not much can be said for the energy sector. For a country with so much promise in the immediate post-independence era even without oil, we still lag behind big time as far as our energy generation is concerned. Some efforts have been made to reduce the deficit, but major investments must be made in alternative sources like solar and wind to address the shortfall and help meet the country’s sustainable development goals.

Another vital area of concern that the experts blame for the continent’s lack of development is the deficit in domestic revenue mobilisation which has long starved Africa of vital funds needed to sponsor spending and various public expenditures at various levels of development – national, regional, and district.

It takes taxation to meet those goals. But when individuals and corporate entities transfer their wealth to the government this way, they do so with the understanding that the money will be used in the most judicious manner to improve the general well-being of the people.

In fact, the inflows we receive from the advanced countries in the form of aid, loans and foreign direct investments are made possible through taxation. Their tax to GDP ratio is way higher than Africa in general and Ghana in particular. The tax to GDP ratio is the contribution of taxes to the country’s total monetary or market value of its finished products and services within a year

It is agreed that at around 12 per cent, Ghana’s tax to GDP ratio is lower than the 16.5 per cent average for Sub-Saharan Africa recommended as the minimum threshold for a fairly healthy economy. Available records indicate that as of August 2021, only 2.4 million, (13.3per cent) out ofabout 18 million potential income taxpayers, were registered as personal income taxpayers.

Meanwhile, only 45,109 entities are reported to be registered as corporate taxpayers while 54,364 persons are registered as self-employed taxpayers at the Ghana Revenue Authority. On the other hand, there are about 17 million registered voters and about 19 million active mobile money accounts. That obviously makes Ghana’s economy a very informal one and that does not conduce to effective mobilisation of personal income tax through the P.A.Y.E. system as pertains in developed countries. The statistics do not look good for development.

It is against this backdrop that the Government sees the E-Levy as an opportunity to make up lost ground. In the Minister’s calculation, the E-Levy, if passed as proposed, would widen the tax base in the medium term and increase the country’s tax to Gross Domestic Ratio (GDP) to 16.5 per cent and subsequently to 20 per cent, “as pertains among our peers.”

Very lofty and laudable ideas if you asked me! But for Ghana, and most African countries, the problem is not so much the lack of resources as our own doing. Mismanagement, corruption, misplaced priorities, insensitivity to the plight of the masses and a host of other self-imposed burdens have conspired to put the gear of progress in reverse.

The Akans have a proverb that: “3mmoa a, omo kՉՉ adidie mmae a, y3nnka bi nnkՉgu mu.” That translates loosely to: “It is unwise to send more cattle out for grazing if the previous herd has not returned home.”

For a start, the levy should be pegged at one per cent given the fairly large size of the cohort of the population projected to be targeted. Besides, we must be meticulously prudent in managing the money and have verifiable evidence of the proper allocation of resources earmarked for the various sectors of our development plan. The advanced countries do it so well that they can squeeze a substantial chunk for us and still manage their health services, education, energy, infrastructure, and housing very well.

Not so in our part of the world where we can collect road tolls for decades yet cannot show concretely how roads benefitted from such tolls. Now, we are told that the toll has been scrapped but only God knows how it will resurrect in one form or another.

In recent times, how many new taxes have been introduced or are to be introduced? I mean the VAT FLAT RATE SCHEME,(VFRS), introduced for retailers and wholesalers at three per cent; VAT withholding, COVID-19 Health Levy adding one percentage point to both VFRS and NHIL, and others? Some have been scrapped but it is like “robbing Peter to pay Paul”.

Ghana needs the money to fast-track its economic transformation. But for this to happen, people have to be healthy, trained to acquire skills, live in decent housing, have access to affordable means of transportation as well as get credit. These are the things that developed countries ensure for their people through the taxes they collect. And these are integral to any development agenda planned for Ghana.

Contact: teepeejubilee@yahoo.co.uk

By Tony Prempeh