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E-Levy, Momo Tax: Everything you need to know about the new 1.75% electronic Levy

The Finance Minister, Ken Ofori Atta Hon., announced a new 1.75% e-levy on all electronic transactions in the 2022 budget, sparking a public outcry on social media since yesterday.

The new ‘e-Levy or Momo tax‘, according to him, will help the government “widen the tax net and rope in the informal sector”. However, A portion of the revenue generated will be used to support entrepreneurship, cyber security, and road infrastructure initiatives.

“After considerable deliberations, the government has decided to place a levy on all electronic transactions to widen the tax net and rope in the informal sector. This shall be known as the ‘Electronic Transaction Levy or e-Levy’.”

“A portion of the proceeds from the E-Levy will be used to support entrepreneurship, youth employment, cyber security, digital and road infrastructure among others, ” he stated.

What is the E-Levy?

The E-Levy is a new tax measure that will be applied only to the originator of a transaction on an electronic platform. Electronic platforms include the following: fintech platforms, online banking, and momo platforms.

How much is the E-Levy

The Value of the E-Levy is 1.75%. The government will apply a rate of 1.75% on all applicable transactions.

How will the e-levy be applied

The levy will be applied to every transaction above GHS 100 on a daily basis. that is, after every GHS 100(cumulative spend) the e-levy will be applied. For example, if Kofi sends GHS 50 to his sister in the morning and sends another GHS 50(totaling GHS 100) to his brother in the afternoon, he will not pay the E-levy. However, any other payment after this threshold will attract the e-levy.

What does this mean to the average Ghanaian? 

According to the Minister, every Ghanaian is expected to pay a GHS 1.75 charge on all transactions above GHS 100. A GHS 17.5 charge on all transactions above GHS 1000. And a GHS 175 charge on all transactions above GHS 10,000 and so on. Mobile money payments, bank transfers, merchant payments, and inward remittances are all examples of electronic transactions that will be taxed.

He did, however, clarify that any transaction under GHS 100 is zero-rated and incurs no additional fees.

Who takes the charges?

According to the minister, the 1.75% e-levy will be paid by the sender on all mobile money payments, bank transfers, and merchant payments. Except for inward remittances, thus, the transfer of funds or money by a party in a foreign jurisdiction to a person or an entity in Ghana will be paid by the recipient. (ZeePay, WU, Unity Link, Ria, Tap Tap Send) etc.

When does it take effect?

The Momo-tax or e-levy policy is scheduled to kickstart somewhere in January 2022, after all the deliberation has been done and approved by Parliament.

Does paying Tax through MOMO to the GRA attract 1.75% e-levy

No, the payment of taxes, etc. on Ghana.Gov does not incur the E-levy.

Why is Government Taxing 1.75% e-levy electronic transactions?

Prior to the announcement of the 2022 budget, the Ghanaian government was looking for long-term revenue sources to complete the country’s inadequate road development projects.

The discussion was how much revenue the road tolls were bringing to the state and the need to increase such revenues to cover the road infrastructure deficit in the country.

Meanwhile, according to the minister, electronic transactions in 2020 was estimated to be over GHS 500 billion compared to the GH¢78 billion in 2016.

A 1.75% e-levy on all electronic transactions is estimated to be about GHS 9 billion, which is enough to cover for road deficit in the country.

Source: mytechhubgh.com

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