All you need to know about the e-levy tax in Ghana & how to avoid it
The controversial e-levy tax imposed on Ghanaians took effect on 1st May 2022 with many mixed reactions and a few technical issues. If you are not too sure what the e-levy is, and how it applies to you as an individual or a business, then this article is for you. Being a tech guy, I have an opinion about the e-levy and I share some tips on how you can avoid it or minimize it in your transactions. Expect some sarcasm because taxing already taxed money can get a bit weird. Let’s get started.
What is the E-levy
In simple terms, the E-levy is a tax on electronic transfers of money in Ghana. But this doesn’t apply to every single electronic transaction. Transactions which are over the GHc 100 threshold will be taxed at a rate of 1.5%. Here’s an example to help you get the picture. Mawuli sends Ghc 90 to his brother, he will not be taxed. Mawuli sends another GHc 50 to his sister on the same day. Mawuli would have sent GHc140 in total to his siblings within a day and so will be taxed on the Ghc40. Any other amount Mawuli sends during the day will be taxed.
The tax lasts for 24 hours so from 12 am to 12 am each day. It also covers all accounts that you own. So if you send Ghc 50 from your bank account and send another Ghc 50 from your mobile money account, the government will be able to track and deduce that you have sent Ghc 100 across electronic channels and hence you will be taxed.
There is no cap on how much the government can siphon money from people that are already paying various forms of taxes. This is just one aspect of the e-levy that stirs controversy but more on that in the FAQs.
Who charges the E-Levy?
So the main organisation collecting and accounting for the money will be the Ghana Revenue Authority (GRA). But the problem is that nobody uses the GRA for e-transactions in Ghana so they will work with other organisations that you and I use on a daily basis and give them the cumbersome task of charging Ghanaians the e levy in addition to their service charges. Who are these organisations?
- Electronic Money Issuers (EMI like MTN Momo, Vodacash etc.)
- Payment Service Providers (PSP like Expresspay, MyGHPay, etc.)
- Specialized Deposit-Taking Institutions (SDI like rural and community banks, savings and loans, etc)
- Other Financial Institutions prescribed by Regulations (No idea who they might be)
In my opinion, I think the GRA could have just taxed these organisations’ service fees. This way, the majority of people will not know much about the tax as we only would go about our day paying service fees. It feels better to pay for one thing than paying for about 3 different things during one transaction.
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E-Levy Ghana charges
Now to the confusing part. The E-levy charge is 1.5%. This means if you are sending GHc1000 and you have already crossed the Ghc100 threshold, you will pay GHc15 as your e-levy. However, a lot of people fail to calculate the charges from the network operators which are already on averagely 1%-3% depending on the network and the amount you are sending.
Some PSPs will also charge about 1% for using their service but let’s not add it for this example so you don’t get too pissed. So practically, if you want to send GHc1000, you will need to have 1000+15+10= Ghc1025 (low estimate).
I’ve already noticed some apps leveraging on this to provide lower fees. An example is the MyGHPay app. I tried sending money to the accounts through that app and these are the results.
Another thing to note is that you can transfer money for free electronically through your own accounts. So if I have a bank account, I can transfer money from my mobile money wallet to my bank without any e-levy charge. I can also transfer money from my MTN mobile wallet to my Voda cash account without any e-levy because I own those accounts. Capisce?
How to avoid the E-Levy
Now for some of you who feel like you’re already paying taxes and would want to minimize your e-levy. I did my research and found these methods. You may not like some of them but it’s better than nothing. Most of these are also legal so you should be ok.
1. Send not more than Ghc 100 each day
Keeping your e-payments low will allow you to totally avoid the e levy. I personally think this limit is just too low but the Government wants to include as many people as possible. This will force behaviours that will go against the entire digitization agenda but you can’t blame them.
2. Use cheques
Some 2000s babies may not know what a cheque is but many years ago, an amount will be written on a piece of paper called a cheque and signed. You can then take this cheque to a bank and withdraw money with it.
3. Use cash
They say cash is king. If you can use only cash your entire life then you shouldn’t even be reading this article. Beware of the risk of carrying cash around town or hiding it under your bed where rats can nibble on them.
4. Use crypto
Cryptocurrency is not recognized as legal tender in Ghana so I don’t even know what you will be buying with it here in Ghana. But I know there are crypto fans out there so rejoice!
5. Let relatives send you money from abroad
The scope of the E-levy does not cover money from abroad. You can have your friends send you money and then convert it to cash to stay clear of the E-levy.
6. Make e-payments to registered merchants only
So if you are paying a business for a service, don’t send the money to their phone number directly. If that business is registered and has a registered payment service then payment can be made without any e-levy. So using Momo pay is an example.
7. User foreign debit and credit cards
If you happen to own a debit or credit that was issued to you outside of Ghana, you should be able to use it within Ghana to pay for goods and services without attracting any e-levy.
Is Ghana Ready for the E-Levy?
The government shut down toll booths around the country to get this up and running so at least we know they are eager but as to whether the tech is ready, well, we will see as the days progress. I use the MyGHPay app for a lot of my payments and all throughout 1st May 2022, when the E-levy was active, the app kept crashing. I couldn’t make any transactions.
And that is where it dawned on me that they will have to implement the e-levy on their systems. When the app started working again the e-levy charges and service fees were all implemented.
Because a simple transaction will now have to be verified from the GRA’s system to ascertain whether the person doing the transaction has exceeded their Ghc100 limit on all their e-transaction accounts or not. Queries will have to be made to GRA databases, as well as bank payment databases to check and verify each transaction user’s status before proceeding.
Ghana is basically launching this nationwide without any known public testing. From my little experience in tech, there are bound to be issues. Will they be major? I don’t think so because the EMIs, PSPs, Banks and SDIs have done most of the heavy lifting. GRA is basically giving them an API to query their database on every single transaction.
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FAQs about the E-Levy with answers
So the important thing to note is that, if you are transferring money either from your bank or momo wallet above Ghc100 electronically to another person, then you will pay the E-levy. Simple. Here are some questions with answers.
What transactions fall under the E-Levy?
Any transfer to or from a mobile money account or from a bank account of a person will be subject to the tax. These include:
- Transfers done on the same mobile money network – For example sending money from your MTN Momo wallet to another person’s MTN Momo wallet.
- Transfers from one mobile money network to a recipient on another network – For example, sending money from your MTN Momo wallet to another person’s TIGO Cash wallet.
- Transfers from bank accounts to mobile money accounts: For example, Kofi transfers money from his CBG bank account to Ama’s MTN mobile money wallet.
- Transfers from mobile money accounts to bank accounts: For example, Esi transfers money from her MoMo money wallet to Yaw’s bank account.
- Bank transfers on an instant payment platform or application which originate from a bank account belonging to an individual: For example, Kwame transferring money from his Bank account to Akua’s Bank account.
What transactions are NOT covered by the E-levy?
The following transfers are excluded from the levy:
- Cumulative transfers of GHS 100 per day made by the same person: Everyone has a daily tax-free threshold (Limit) of GHS 100 – that is every person will be able to transfer up to GHS100 a day without the payment of the levy;
- Transfers between accounts or mobile money wallets owned by the same person: If you are transferring money to your own account (i.e., of the same person) then you will not be charged the ELevy. A transfer from Kojo’s Tigo wallet to his MTN wallet or from his CBG bank account to his GCB bank account or from his savings account to his current or investment account, will not attract the levy.(NB:Only wallets and bank accounts linked to Ghana card will enjoy this exemption)
- Transfers for the payment of taxes, fees, and charges: Any payment of taxes fees or charges made to a Government Ministry Department or Agency (MDA) or Metropolitan Municipal and District Assembly (MMDA) using the Ghana.gov platform or other designated method, do not attract the levy.
- Electronic Clearing of Cheques: Clearing of cheques by the banks and specialized deposit-taking institutions such as the savings and loans companies etc. are excluded.
- Specified merchant payments: Payments made to commercial establishments through a payment service (mobile money, bank application, Fintech etc.) to a person registered with the Ghana Revenue Authority for the purposes of income tax or value-added tax is excluded. This applies to both online and physical sales.
- Transfers between principal, agent, and master-agent accounts: To avoid charging the levy multiple times transfers that pass-through multiple service providers before they get to the actual recipient do not attract the levy.
If I do transfer that the E-levy applies to, but then afterwards I cancel the whole transfer, can I reclaim the tax that was deducted?
Yes. When a customer cancels a transfer from their momo wallet, the whole transaction will be reversed by MTN Mobile Money and the E-Levy deducted as part of the transfer will also be reversed and returned to the customer after they submit a proof of identity and the transaction ID.
Will the levy be charged on payments of wages and salaries using mobile money?
Yes, salary payment is made from a mobile money wallet and will therefore attract e-levy charge on the amount subject to the daily exemption of GHS100.
Will Mobile Money loans attract E-Levy?
Loan disbursement and repayments will not attract the Levy if the institution disbursing the loan is registered with the GRA for Income tax or VAT.
Will Point-Of-Sale (POS) transactions attract the E-Levy?
No, if the POS transaction is a payment to a commercial establishment registered with the GRA for income tax or VAT purposes, the Levy will not apply. This is captured under the specified merchant transaction exemptions.
Will Cash-In and Cash-out for Mobile Money attract the E-Levy?
No, both Cash-in and Cash-out are not subject to the E-Levy.
Will mobile money wallet balances attract the E-Levy?
No, mobile money wallet balances will not attract the Levy. The Levy applies only when there is an applicable electronic transfer from your mobile money wallet.
If I need help, Ghana Revenue specific or related, who do I contact?
A dedicated call centre has been set up to help individuals who may need further clarification or who might be experiencing any challenges. You can contact GRA on:
Possible use cases of the E-Levy data
I want to end on a good note. Never in the history of Ghana has so much financial data of individual citizens been gathered. I think this data opens up lots of opportunities for innovation within the fintech space in Ghana. First of all, I think the government should provide a platform where anyone can monitor their electronic transactions as well as the e-levy that has been paid over a period of time. It is our data anyway so it should be made readily available to us without us having to write letters.
With this data, the ordinary Ghanaian can use this as leverage to qualify for credit. Imagine this, A market woman does over Ghc5,000 in e-transactions each month and has paid the necessary e-levy. If this woman is in need of a loan from a bank and shows her transaction history over a period, any sensible bank should be able to recognize a cash flow pattern and determine if this person can make a repayment of a loan over a period of time. Without needing a bank account, this market woman will be able to access credit when she needs it.
This can even be used by landlords to determine if a tenant can pay their rent on a monthly basis instead of paying for 1-5 years in advance. Companies that sell electronics for example can use this information to sell their electronics on hire purchase knowing that the person’s financial data is legitimate.
The options are endless. There is so much we can do with data and that may be the only reason why I am interested in seeing how this e-levy goes. Apart from the transparency and accountability required of the GRA to develop trust in this system by the ordinary Ghanaian, the government should use the money for what it is intended for.
I hope this has been useful. Lemme know how you think the e-levy can bring some significant change to Ghana. If this was helpful then please share it with a friend. Let me know what you think about the e-levy and how it is affecting your life.