Ghana's E-Levy - 3 Lessons From the Abolished Mobile Money Tax

On 11 March, Ghana's new government delivered its first budget speech. The finance minister, Cassiel Ato Forson, described an economy in crisis. He highlighted high debt and fiscal mismanagement. Forson admitted that key International Monetary Fund targets would be missed. He also announced significant spending cuts.

Many Ghanaians were eager to hear about the electronic transfer levy (e-tax). The minister had hinted at its removal. He confirmed this decision, which parliament approved unanimously the next day. The e-levy was a fee on mobile money transactions introduced in 2022. It faced immediate and fierce opposition from Ghanaians as it took effect.

Both major political parties campaigned for its removal before the December 2024 elections. Researchers from the International Centre for Tax and Development studied the e-levy over three years. They focused on digital financial services, identities, and tax issues in Ghana.

The e-levy's politicization made it a notable case among mobile money taxes in the region. Researchers learned about its impact on informal workers in Accra and mobile money usage.

Three key lessons emerged from this research:

1. The e-levy became an important revenue source for Ghana.
2. It provided valuable data to identify unregistered high-income users.
3. Stakeholders like mobile money providers were not managed well initially.

The e-levy was introduced during a time of fiscal distress. Mobile money transactions grew rapidly after COVID-19, making it an attractive tax target for the informal sector. Introduced at 1.75% with a daily exemption of 100 cedis (US$10), it faced strong resistance.

Protests erupted after the budget was rejected, leading to negotiations with the public. The government held town hall meetings and reduced the rate to 1.5%. Despite these efforts, negative sentiment persisted due to confusion over implementation.

The government framed the tax as essential for national development but struggled to justify it effectively. Studies found widespread dissatisfaction among Ghanaians regarding trust in government spending.

New taxes are often unpopular but should not be judged solely on that basis. Key performance indicators include:

**Revenue:** The e-levy met only 12% of its initial target of GH₵6.96 billion (US$380 million). However, this reflects poor forecasting rather than failure in implementation.

**Mobile Money Usage:** Critics feared negative effects on financial inclusion; however, studies showed that transactions initially dropped but rebounded and grew again.

**Equity Effects:** Despite exemptions, studies found that the e-levy was highly regressive overall. Low-income users bore most of the tax burden despite some protections from exemptions.

This outcome is surprising since the e-levy's design aimed to be less regressive than other mobile money taxes in Africa.