Ghana, and how not to tax mobile money
but remains in place for now, although it’s real value has been eroded by inflation over the past 12 months.The levy’s effects – on Ghana’s public finances, on its poor and on mobile money usage – have been at the centre of intense and polarising public conversations, much of it without an empirical basis.from a survey of 2 700 self-employed informal sector operators, carried out just before the introduction of the e-levy, where we showed the likely impact of the tax on Accra’s informal sector.
What does the lowered rate of 1% mean for informal workers? In our recent study, we analysed information on the use of mobile money transactions among informal sector operators in Accra. We divided informal sector operators into five equal groups , based on their reported earnings. Before the lower rate of 1% was introduced in January 2023, we calculated that e-levy payments would amount to about 4% of reported monthly earnings for the lowest earning quintile.
The lower rate brings a small degree of relief for the lowest earners. When the new e-levy rate is mapped onto our survey data, the lowest earning quintile would pay about 3% of their monthly earnings towards this tax, all else remaining equal.– the lowest earning quintile would pay, on average, 7% of their monthly earnings towards the e-levy.
As mobile money taxes gain popularity across the continent, their design requires very careful consideration. Currently there are at leastOur research suggests that efforts to protect the poorest mobile money users should be the priority. We further argue that Ghana’s use of a protective threshold is an important feature of the policy design – more important than, for example, simply lowering the rate – but that it doesn’t go far enough to protect the poor.
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