In an obscure nook of the sprawling Makola market in Ghana’s capital, Accra, Nana Adwoa Animful arranges rows of wigs.
The 59-year-old sells hair merchandise and equipment from her modest stall.
Most of her enterprise is carried out utilizing cell cash, which is an digital pockets service that enables registered customers to retailer, ship and obtain fee utilizing their accounts.
This fee technique is quicker, extra handy, and extra dependable than the standard banking system, in line with Ms Animful.
As a consequence, the federal government’s new 1.5% tax on all digital transactions above 100 Ghanaian cedi ($13; £11) – often known as the e-levy – is a supply of concern for her. It comes into power on 1 Might.
“We now have so as to add e-levy on prime of the price of the merchandise, which is able to improve the value,” she tells the BBC.
“In any other case, we’ll return to money which typically would not assist us as a result of we get faux notes and typically underpayments.”
Ms Animful is one among many market sellers anxious in regards to the controversial tax.
The e-levy may also apply to financial institution transfers and remittances in addition to cell cash transactions.
Critics of the regulation say it would hit low-income employees and small companies the toughest, as they rely closely on cell cash transactions.
Final 12 months, the parliamentary debate on the e-levy ended with punches being thrown, such was the extent of disagreement. The regulation was finally handed however solely after opposition MPs staged a walkout.
Banks are far and few between in rural areas of the nation and cell funds are seen as a low-cost, secure and environment friendly various to both a checking account or holding giant quantities of money.
Consequently almost 40% of Ghanaians aged 15 and above use cell cash platforms.
However the e-levy has raised considerations over the way forward for cell cash.
There are already indicators that individuals are turning their backs on digital funds. The central financial institution has reported that the trade misplaced over $1bn within the two months from final November as shoppers began utilizing money forward of the tax coming into power.
The federal government has been making an attempt to construct a digital economic system lately to cut back the usage of bodily money. However it now admits the brand new tax might see a giant drop in the usage of cell cash providers inside the first few months of it taking impact.
Deputy Finance Minister John Kumah informed native media that “there will probably be about 24% attrition charge within the three months to 6 months that we’ll introduce it”.
“The identical analysis informed us what needs to be performed to carry again these individuals after some time, and we’ve all this stuff in place,” he mentioned.
A lot of Ghana’s economic system operates exterior the formal sector and fewer than 10% of the inhabitants pay direct taxes. The authorities have defended the brand new tax by saying that it’s going to widen the tax base, enhance authorities income and put a dent within the nation’s $50bn debt.
In a latest interview with the BBC, Ghana’s President Nana Akufo Addo mentioned that the nation’s tax-to-GDP ratio was 13% – far decrease than the common in West Africa of 18%. Most European international locations have a ratio of 35-45%, whereas the US has about 25%.
“We’re speaking about taxing an trade the place lots of worth is being created and we need to additionally carry that worth into authorities coffers,” he added.
The federal government says it would use the cash generated by the e-levy for growth tasks similar to constructing roads and hospitals, and creating jobs to cut back unemployment, though some concern that the additional cash raised might as a substitute find yourself within the pockets of officers.
It’s estimated that final 12 months $126bn-worth of cell cash transactions have been made and the federal government hopes that the e-levy will increase virtually $1bn this monetary 12 months.
Some consultants have steered alternative routes to generate income.
Remodeling current taxes as a substitute, like “company revenue tax, private revenue tax, even VAT” might assist the federal government increase much more cash, professor Godfred Bokpin, a lecturer on the College of Ghana Enterprise Faculty, informed the BBC.
Comparable taxes launched in Zimbabwe and Cameroon have additionally proved controversial.
In 2019, Zimbabwe launched a 2% cash switch tax that was massively unpopular. Finance Minister Mthuli Ncube agreed to assessment it however mentioned it was too early to make changes because it was a significant supply of state income.
In Cameroon, a proposed 0.2% tax on cell cash transactions triggered an enormous backlash and resulted in a social media marketing campaign #EndMobileMoneyTax. The federal government nonetheless went forward and carried out it in January this 12 months.
Tanzania’s authorities can also be now contemplating taxing on-line companies. A workforce of consultants from Meta – the corporate that owns Fb, Instagram and WhatsApp – visited the business hub of Dar es Salaam to carry talks with authorities on easy methods to tax their providers within the nation.
It’s seemingly that different African governments, reeling from the financial hardships of the Covid-19 pandemic and now dealing with the fallout from the Russia-Ukraine disaster, might flip to an e-levy to lift more cash, regardless of the affect on some residents.
In Ghana, the 1000’s of individuals immediately employed within the cell cash enterprise are much more alarmed than the merchants.
“I am very anxious in regards to the e-levy. The federal government didn’t educate us the residents nicely about it,” mentioned James Mawuli, who works as a cell cash vendor in Accra.
The 32-year-old helps individuals handle their cell cash accounts and withdraw money as wanted. He mentioned he had already misplaced many shoppers due to the deliberate e-levy and fears he would possibly lose his job.
“Lots of people have even began withdrawing all their cash forward of its implementation and our transactions have diminished,” he mentioned.
“It will be a giant drawback for us.”
Opposition MPs are already difficult the legality of the regulation and have filed an injunction on the Supreme Courtroom.
That ruling is anticipated in early Could days after the tax comes into impact.
