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In an enormous store on the coronary heart of the sprawling Makola market in Ghana’s capital, Accra, Nana Adwoa Enninful arranges rows of wigs.
The 59-year-old sells hair merchandise and equipment from her modest store.
A few of her enterprise is carried out utilizing cell cash, which is an digital pockets service that enables registered customers to retailer, ship and obtain fee utilizing their accounts.
This fee methodology is quicker, extra handy, and extra dependable than the normal banking system, in line with Ms Enninful.
As a consequence, the federal government’s new 1.5% tax on all digital transactions above 100 Ghanaian cedi ($13; £11) – often known as the e-levy – is a supply of concern for her. It comes into pressure on 1 Might.
“We’ve got so as to add e-levy on prime of the price of the merchandise, which is able to improve the worth,” she tells the BBC.
“In any other case, we’ll return to money which generally does not assist us as a result of we get pretend notes and generally underpayments.”
Regardless of her measured response, telling me it’s good the federal government is making an attempt to boost cash, she continues to be fearful concerning the controversial tax, like many market sellers.
Ms Enninful is one in every of many market sellers fearful concerning the controversial tax.
The e-levy will even apply to financial institution transfers and remittances in addition to cell cash transactions.
Critics of the regulation say it is going to hit low-income staff and small companies the toughest, as they rely closely on cell cash transactions.
Final 12 months, the parliamentary debate on the e-levy ended with punches being thrown, such was the extent of disagreement. The regulation was ultimately handed however solely after opposition MPs staged a walkout.
Banks are far and few between in rural areas of the nation and cell funds are seen as a low-cost, secure and environment friendly various to both a checking account or holding massive quantities of money.
Consequently practically 40% of Ghanaians aged 15 and above use cell cash platforms.
However the e-levy has raised issues over the way forward for cell cash.
There are already indicators that individuals are turning their backs on digital funds. The central financial institution has reported that the business misplaced over $1bn within the two months from final November as customers began utilizing money forward of the tax coming into pressure.
The federal government has been making an attempt to construct a digital financial system in recent times to scale back using bodily money. But it surely now admits the brand new tax may see an enormous drop in using cell cash companies inside the first few months of it taking impact.
Deputy Finance Minister John Kumah advised native media that “there will probably be about 24% attrition fee within the three months to 6 months that we’ll introduce it”.
“The identical analysis advised us what ought to be achieved to convey again these individuals after some time, and we’ve all these items in place,” he mentioned.
A lot of Ghana’s financial system operates exterior the formal sector and fewer than 10% of the inhabitants pay direct taxes. The authorities have defended the brand new tax by saying that it’s going to widen the tax base, increase authorities income and put a dent within the nation’s $50bn debt.
In a latest interview with the BBC, Ghana’s President Nana Akufo Addo mentioned that the nation’s tax-to-GDP ratio was 13% – far decrease than the typical in West Africa of 18%. Most European international locations have a ratio of 35-45%, whereas the US has about 25%.
“We’re speaking about taxing an business the place a number of worth is being created and we need to additionally convey that worth into authorities coffers,” he added.
The federal government says it is going to use the cash generated by the e-levy for improvement initiatives equivalent to constructing roads and hospitals, and creating jobs to scale back unemployment, though some concern that the additional cash raised may as a substitute find yourself within the pockets of officers.
It’s estimated that final 12 months $126bn-worth of cell cash transactions had been made and the federal government hopes that the e-levy will elevate virtually $1bn this monetary 12 months.
Some specialists have advised other ways to generate income.
Remodeling current taxes as a substitute, like “company revenue tax, private revenue tax, even VAT” may assist the federal government elevate much more cash, professor Godfred Bokpin, a lecturer on the College of Ghana Enterprise Faculty, advised the BBC.
Related taxes launched in Zimbabwe and Cameroon have additionally proved controversial.
In 2019, Zimbabwe launched a 2% cash switch tax that was massively unpopular. Finance Minister Mthuli Ncube agreed to overview it however mentioned it was too early to make changes because it was a significant supply of state income.
In Cameroon, a proposed 0.2% tax on cell cash transactions triggered an enormous backlash and resulted in a social media marketing campaign #EndMobileMoneyTax. The federal government nonetheless went forward and applied it in January this 12 months.
Tanzania’s authorities can also be now contemplating taxing on-line companies. A workforce of specialists from Meta – the corporate that owns Fb, Instagram and WhatsApp – visited the industrial hub of Dar es Salaam to carry talks with authorities on tips on how to tax their companies within the nation.
It’s probably that different African governments, reeling from the financial hardships of the Covid-19 pandemic and now going through the fallout from the Russia-Ukraine disaster, may flip to an e-levy to boost more cash, regardless of the impression on some residents.
In Ghana, the 1000’s of individuals instantly employed within the cell cash enterprise are much more alarmed than the merchants.
“I am very fearful concerning the e-levy. The federal government didn’t educate us the residents nicely about it,” mentioned James Mawuli, who works as a cell cash vendor in Accra.
The 32-year-old helps individuals handle their cell cash accounts and withdraw money as wanted. He mentioned he had already misplaced many purchasers due to the deliberate e-levy and fears he would possibly lose his job.
“Lots of people have even began withdrawing all their cash forward of its implementation and our transactions have decreased,” he mentioned.
“It’ll be an enormous downside for us.”
Opposition MPs are already difficult the legality of the regulation and have filed an injunction on the Supreme Courtroom.
That ruling is predicted in early May days after the tax comes into impact.
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