The debate surrounding the Electronic Transaction Levy (E-Levy) in Ghana continues to spark discussion, even after the election of President John Dramani Mahama, who campaigned on a promise to abolish it. While public expectation leans towards a complete removal of the levy, Dr. Kwame Asah-Asante, a political scientist, offers a contrarian perspective. He argues against a complete and immediate scrapping of the E-Levy, advocating instead for a gradual reduction. Dr. Asah-Asante believes that the E-Levy, despite its unpopularity, represents a readily available revenue stream that contributes to national development. He contends that a phased approach to its removal would allow the government to adjust its revenue strategies and explore alternative sources without jeopardizing crucial funding for public services.
The E-Levy, introduced in May 2021 by the previous Akufo-Addo administration, was initially set at 1.5% on specific electronic transactions. Facing widespread public resistance, particularly from those in lower income brackets who felt disproportionately burdened, the government reduced the levy to 1% in January 2023. Despite this reduction, the levy remained a contentious issue throughout the 2024 election campaign. Both leading candidates, John Dramani Mahama of the National Democratic Congress (NDC) and Dr. Mahamudu Bawumia of the New Patriotic Party (NPP), pledged to abolish it if elected. President Mahama’s landslide victory now puts him under pressure to fulfill this promise within his first 100 days in office.
Dr. Asah-Asante’s cautionary approach highlights the complexities of managing public finances in a developing economy. He acknowledges the public sentiment against the E-Levy but emphasizes the need for a responsible fiscal approach. His argument rests on the premise that immediate removal could create a budgetary gap, potentially impacting government programs and services. A gradual reduction, he suggests, would provide a smoother transition, allowing the government to identify and implement alternative revenue streams without disrupting critical public spending. This phased approach, he believes, balances public demand for relief with the practical realities of fiscal responsibility.
While the public eagerly anticipates the fulfillment of President Mahama’s campaign promise, Dr. Asah-Asante’s perspective introduces a nuanced consideration. The E-Levy, despite its unpopularity, has become a component of the government’s revenue structure. Abruptly removing it without a clear plan for replacing the lost revenue could have unintended consequences. A gradual reduction, coupled with a concerted effort to diversify revenue streams, might be a more prudent approach, ensuring fiscal stability while addressing public concerns. This approach, though perhaps less politically expedient, could offer a more sustainable solution in the long run.
The government now faces the challenge of balancing competing priorities: fulfilling its campaign promise to abolish the E-Levy while ensuring the stability of public finances. The decision to completely scrap or gradually reduce the levy will undoubtedly have significant economic implications. A complete removal might provide immediate relief to the public but could lead to a funding shortfall, potentially impacting government programs. A gradual reduction, whilst potentially viewed as a betrayal of a campaign promise, provides a more measured approach, allowing for adjustments to revenue strategies and minimizing disruption to public spending. The government must carefully weigh these considerations to arrive at a decision that best serves the interests of the nation.
The E-Levy saga in Ghana serves as a case study in the challenges of tax policy in a developing nation. It highlights the tension between the need to generate revenue for development and the importance of public buy-in for tax policies. While the public desire for tax relief is understandable, it is crucial to consider the broader economic context and the potential consequences of abrupt policy changes. The debate over the E-Levy underscores the necessity of thoughtful and well-planned fiscal policies that balance public needs with sustainable revenue generation. A balanced approach, possibly involving phased reductions alongside exploration of alternative revenue sources, may offer a path forward that addresses both public concerns and the need for responsible fiscal management.
