Ghana’s government recently announced the reintroduction of the road toll system, raising questions about the effectiveness of the current electronic levy (e-Levy) and the impact of these levies on the country’s revenue, economy, and businesses.
The government further announced the reduction of the e-levy rate from 1.5 per cent to 1.0 per cent on 11 January 2023. While the e-Levy was introduced to generate revenue for the government, its implementation has been met with fierce resistance from various sectors, including the financial technology industry. On the other hand, the road toll was cancelled in favour of the e-Levy, but its reintroduction suggests that the e-Levy could not generate the expected revenue.
In this article, I examine the impact of the levies on Ghana’s revenue, economy, and businesses and evaluate the need to strike a balance between revenue generation and economic growth. I also consider the potential impact of the levies on businesses and consumers and explore alternative revenue generation strategies that could be more effective and less burdensome on Ghana’s economy.
Impact on Revenue
The e-Levy was introduced to generate revenue for the government, but its implementation could have been more effective. While the e-Levy charged a 1.5% (now 1.0%) tax on all mobile money transactions, it has been met with resistance from the public, who see it as an unnecessary burden on an already struggling economy.
The government hoped to generate GH¢1.15 billion ($198 million) from the e-Levy; as of September 2021, the revenue generated was only GH¢216.78 million ($37 million). As a result, the government announced reintroducing the road toll, which could generate more revenue. According to the government, the road toll generated GH¢39 million ($6.7 million) monthly before it was cancelled.
Impact on Economy
Excessive levies can discourage economic activity and innovation, especially in the technology and financial sectors. The introduction of the e-Levy was met with fierce resistance, especially from the financial technology sector, which saw it as an impediment to innovation and growth. Additionally, the cancellation of the road toll in favour of the e-Levy aimed to reduce the burden on road users.
However, reintroducing the toll levy may affect transportation costs and businesses that rely on road transportation. Therefore, it is essential to evaluate the impact of the levies on businesses and the economy to ensure that they do not stifle growth or innovation.
Impact on Businesses
The e-Levy and road toll impact businesses in various ways. The introduction of the e-Levy has increased transaction costs for businesses, which could discourage the adoption of mobile money as a payment method. Reintroducing the road toll could also affect transportation costs for companies that rely on road transportation. The levies’ impact on businesses should be carefully evaluated to ensure they do not stifle growth or innovation.
Alternative Revenue Generation Strategies
Finally, alternative revenue generation strategies should be considered. For example, the government could invest in renewable energy, mining, and agriculture to generate revenue without stifling economic growth. These sectors have the potential to generate significant revenue for the government while promoting economic growth and innovation.
Ghana’s levies impact revenue, the economy, and businesses. The government must strike a balance between revenue generation and economic growth, taking into account the levies’ potential impact on businesses and consumers. Alternative revenue generation strategies should also be explored to promote economic growth and innovation.
Reintroducing the road toll is a step in the right direction. Still, its effectiveness in generating revenue and its impact on businesses and the economy must be carefully evaluated. A comprehensive and thoughtful approach to fiscal policy in Ghana is needed to promote economic growth and prosperity.