Mobile money taxation and informal workers: Evidence from Ghana's E‐levy

Abstract

SummaryMotivationIn recent years, governments in low‐income countries have increasingly introduced taxes on mobile money transfers. These are often explicitly promoted as a way of taxing informal economic activity, but critics have noted their potential negative impact on lower‐income groups and specifically those in the informal sector. Yet there is virtually no evidence base on the effects of mobile money taxes on informal workers.PurposeThis article assesses how informal workers in Accra, Ghana, use mobile money and how they perceive Ghana's Electronic Transfer Levy (E‐levy), introduced in May 2022. This provides a particularly interesting case study to explore the equity implications of the tax, as the policy was explicitly justified as a way of taxing the informal economy but also includes measures to limit the tax burden on lower‐income groups.Methods and approachThe article uses data from a survey of 2,700 self‐employed informal workers in the Accra Metropolitan Assembly to capture citizen perceptions of the policy and to examine the likely impact of the E‐levy on informal workers with reference to equity.FindingsOverall, our results suggest that the E‐levy is highly regressive. Further, we show that most informal workers disapprove of the E‐levy, reflecting not just concerns about its equity impacts, but also disappointment with the government's performance.Policy implicationsOur findings suggest that taxes on digital financial services should be reconsidered from an equity perspective. While some policy measures, including those undertaken in Ghana, can protect low‐income earners, they are often insufficient to counteract overall regressive impacts. Where they are implemented, social spending from the revenue from these taxes should target low‐income populations in the informal economy, while governments should focus on building trust among informal workers with regard to revenue raising and spending.

Do the People Matter in Policymaking in Ghana? A Reflection on the E-Levy and Debt Exchange Programs

“…Books such as Anderson (2011), Birkland (2015, Dye (2013), Locke (1980), and articles authored by Edelenbos (1999), Hiller, Landenburger & Natowitcz (1997), Kpessa (2011), andMohammed (2015) have been instrumental in the writing of this work. Other relevant sources that were consulted in the writing include Adams (2022), Agyeiwaa-Afrane et al ( 2022), Anyidoho, Gallien, Rogan, and Boogaard(2022), Arhinful (2022), andAhinsah-Wobil (2022).…”

“…Other relevant databases were also helpful for the writing. The databases include Adams(2022), Agyeiwaa-Afrane et al (2022), Anyidoho, Gallien, Rogan, and Boogaard(2022), Arhinful (2022), and Ahinsah-Wobil (2022).…”

Cameroon’s Tax on Mobile Money: Implications for Agents’ Performance and Revenue Sustainability

“…The government also introduced a cumulative daily exemption of up to GH₵100 (US$ 9.09). Anyidoho et al (2023) assess the impact of the E-levy on Ghanaian informal workers, underlining its highly regressive nature. In particular, their findings reveal that those with lower incomes in the informal sector bear a disproportionately greater burden from the levy than those with higher incomes.…”

“…Katusiime (2021) shows that introducing the mobile money tax (MM tax) has led to a decline in both the volume and value of mobile money transactions. In a recent study, Anyidoho et al (2023) examine how informal workers perceive the new mobile money tax (E-levy) introduced in Ghana in May 2022. Their findings show that the E-levy is highly regressive, implying that lower-income informal workers are more affected than those with higher income.…”

Are Digital and Traditional Financial Services Taxed the Same? A Comprehensive Assessment of Tax Policies in Nine African Countries

“…New taxes on DFS could jeopardise the decade-long progress made on financial inclusion. Proponents of these taxes justify them as an administratively simple way to raise additional revenue, and a route to taxing the informal economy (Anyidoho et al 2022). This debate has primarily focused on sectorspecific taxes imposed on MM services provided primarily by multinational telecom operators (Munoz et al 2022: 6).…”