E-levy to drive Gov’t revenue to 20% of GDP in 2022 – Fitch projects

International rating agency, Fitch, has projected that the electronic transaction levy will help increase government revenue to 20 percent of GDP in 2022.

The 1.75% electronic transaction levy, also known as the e-levy, has become a controversial subject in the country, with both sides in Parliament sharply divided over its approval.

While the Majority is fully in support of the levy, the Minority wants it rejected.

At the moment, the e-levy bill has not been approved, as it is yet to be resubmitted to Parliament.

But the government is bent on having it passed because it expects to raise about GH¢7 billion in tax revenue from the E-levy to tackle some socio-economic challenges.

According to Fitch, the e-levy, in addition to the new revenue measures introduced in the 2022 budget and the fading out of COVID-19 related expenditure, will boost the country’s revenue to GDP ratio to 20 percent compared to an estimated 15.4 percent of GDP last year.

The agency further forecast that Ghana’s fiscal deficit will narrow by significantly less to 9.5 percent of GDP in 2022 and approximately 8.0 percent in 2023, as government revenue experiences a smaller margin of increase.

Economist and lecturer at the University of Ghana Business School, Dr. Patrick Asuming has been speaking to Citi Business News on the development.

“The projection that the government has made in terms of proceeds from the e-levy is probably a little optimistic. We have witnessed the value of transactions and have made the projection that if you put 1.75%, this is how much revenue you make. I’m not sure whether they factored in the fact that in its current state when the e-levy is imposed, it’s likely to lead to some change in behaviour.”

“I definitely expect that on some level, the value transactions of transactions might reduce. Some transactions may cease and along some lines where people might have other options, they’ll probably use alternative modes of payment. But that doesn’t change the fact that it’ll still raise substantial revenue from the elevy. I’m just not convinced that they’ll raise the amount that they have projected” Dr. Asuming further noted.