Ghana's Tax Administration Aberrates from the Disputed 1% Digital Tax
Ghana Abolishes Controversial E-Levy, Boosting Digital Financial Growth
In a move aimed at addressing public concerns and improving the tax system, the Ghanaian government has announced the abolition of the 1% Electronic Transfer Levy (E-Levy) effective April 2, 2025. This decision is part of a broader tax reform initiative that seeks to simplify the tax regime and reduce the cost of digital transactions.
The E-Levy, introduced in May 2022 through the Electronic Transfer Levy Act, 2022 (Act 1075) and its 2022 amendment (Act 1089), has been a source of public anger due to its impact on low-income Ghanaians and its potential negative effect on digital financial growth. Despite being intended to boost Ghana's revenue amid a fiscal crunch, the E-Levy raised only GHS 1.2 billion in 2023, significantly lower than the projected GHS 4.5 billion annually.
The removal of the E-Levy is expected to encourage greater usage of electronic transfers and digital payments, which are key to financial inclusion and economic modernization in Ghana. This could help reduce the cost of doing business, increase transaction volume, and stimulate economic activity by making digital financial services more affordable.
The reform is part of Ghana's mid-year budget review and broader fiscal policy adjustment that also involves simplifying the Value Added Tax (VAT) structure, removing certain exemptions, and enhancing tax compliance mechanisms. Removing the E-Levy may also improve public perception of the tax system by addressing a highly contested charge, potentially leading to improved tax morale.
This strategic tax policy shift aligns with wider tax reforms the government is instituting in 2025 to simplify the tax regime and respond to criticism and policy guidance, including recommendations from international bodies such as the IMF, which advised reducing overlapping taxes including levies that cascade alongside VAT.
In summary, the abolition of Ghana’s 1% E-Levy on April 2, 2025, represents a significant step towards easing the burden on electronic transactions, boosting economic growth, and responding to public and international pressure for more efficient and fair taxation.
In light of the E-Levy's negative effects on digital financial growth, public anger, and low revenue collection, the Ghanaian government is abolishing the 1% tax on electronic transfers. This decision in the mid-year budget review aims to foster more affordable digital financial services, stimulate economic activity, and improve public perception of the tax system by addressing a contentious charge. This strategic shift in tax policy also aligns with international bodies such as the IMF's recommendations for more efficient taxation.
