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Sunday, May 19, 2024

*The E-levy Debate: let’s Accept Innovation to Grow our Economy*-Kingsley Nyarko, MP, Kwadaso

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In 2019, the world was hit with a pandemic that has destabilized all economies. The covid 19, a novel viral disease that has manifested in various forms such as delta and omicron, and which at the onset gave scientists and researchers a tough time, has and it’s still posing health and economic challenges to countries around the globe.
The threats posed by the virus made governments take decisions and steps in order to contain the virus and also to protect lives, livelihoods and property.
I must point out that, the decisions and strategies adopted by governments were different based upon their respective understanding of the disease, their proactiveness and resolve to ensure that their citizens are well protected, save and less negative consequences on their economies.
In Ghana, there’s no denying the fact that, the government, led by President Nana Addo Dankwa Akufo-Addo, was proactive and diligent in ensuring that lives and livelihoods were protected and the economic outlook preserved.
The government’s proactiveness in handling the pandemic made the country one of the few countries in the world whose efforts were appreciated and commended by all. If the government had not been that proactive, folks, the story would have been different and our situation more dire.
It is also obvious that the pandemic has negatively impacted our economy and big ones such as the USA, Germany  which we can’t deny and wish away and must collectively address. The consequences of the pandemic with its associated lockdowns, reduced anticipated revenues (GHS11.9 billion ), increased expenditure (GHS14.1 billion) (especially for the vulnerable) mean that we need to implement fiscal measures  to revive the economy and bring it back on its sound prepandemic period (2017-2019).
Before the pandemic, the macroeconomic indicators were solid, our debt position was manageable, our credit ratings had received upgrades by moody and Fitch, the exchange rate was relatively stable with marginal parity reduction in relation to periods before 2017, joblessness was aggressively pursued through job creation interventions, access at the secondary education level expanded, increased investor confidence leading to multinational companies such as Toyota, Volkswagen establishing their plants in the country among others.
In our president’s first address to the nation when the strange and deadly virus was discovered in the country, he said that, we don’t know how to bring back lost lives, but we know how to bring the economy back. Note that he didn’t say I, but we, suggesting that, he believes in the people of Ghana to work together, support the government to make the economy better again for us all.
This is what the government has started doing through the numerous fiscal measures outlined in the 2021 and 2022 budget statements and economic policies of the government. On 22nd December, 2021, the European Union decided to introduce three new taxes to offset Covid 19 borrowing by the various governments. This intervention is to raise $904 billion. On 7th September, 2021, the UK government announced the introduction of a new 1.25% health and social care levy on earned income across England. All these are being done to revive their ailing economies.
Folks, one of the most innovative fiscal intervention, which has become controversial is the Electronic Transaction Levy (E-Levy). The E-levy has become very necessary because of the shift from cash transactions to digital or electronic transactions in recent times  and also to widen the tax base, rope in the informal sector and to increase our tax to GDP ratio which stood at 12.2% in 2020 which is one of the lowest in Sub-Saharan Africa with an average tax to GDP ratio of 16.5%. With our population of 30.8 million, a tax to GDP ratio of 12.2% is woefully inadequate compared with Senegal with a population of 16.7 million and a tax to GDP ratio of 16.4% and South Africa with a population of about 59 million and a tax to GDP ratio of 26.4%.
To make our plight worst, out of a potential personal income tax payer population of 18 million, only 13.8% are registered to pay tax. This situation, if not passionately and vigorously addressed will perpetually compromise our revenue mobilization, restrict our fiscal options, worsen our debt, balance of payment and trade positions.
The E-levy, though not the panacea nor the solution nor the magic wand to our socioeconomic ills, is one of the most innovative solutions to give us additional revenue and the fiscal space to improve upon the socioeconomic fortunes of the country.
Opting for the E-levy—an internally generated revenue stream, is a better option than seeking intervention from the IMF with its consequential conditionalities, which history has shown us that, it’s not a worthy option; neither is it able to address our present liquidity challenges. We sought IMF bailout in 2014, what was the outcome? What changed positively? I think seeking IMF intervention is the easiest approach; the E-levy intervention is innovative and progressive.
Folks, let’s accept this creative and innovative revenue enhancing intervention. This is a rare opportunity to help the economy out from our perennial revenue enhancement difficulties. E-levy is a blessing; it might be a burden on our pockets, but hidden in a blessing. God bless Ghana!!!
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