Ghana approves tax on electronic payments despite opposition protest

ACCRA, March 29 (Reuters) – The Ghanaian parliament on Tuesday approved a new 1.5% tax on electronic payments, known as “electronic collection”, after the opposition left in protest.

Finance Minister Ken Ofory-Ata proposed an electronic levy in November to expand the tax network and presented it as a panacea for Ghana’s financial woes. The opposition was so fierce that a month later it sparked a brawl in parliament.

Critics say the e-tax will get out of the digital economy for low-income and small business owners, while Ofori-Ata said it is a way to ensure that Ghanaians “contribute their fair share” to development.

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Ruling lawmakers re-introduced the bill on Tuesday, when many opposition lawmakers were not present. The unexpected move, which analysts have previously said, will be one of the only ways to pass the tax. read on

It was expected to be re-introduced next week, but Parliament Speaker Alban Bagbin said it needed to be seen as an urgent matter, and has accelerated.

“The country’s financial institutions should not be subject to these punitive, insensitive taxes. This will hamper Ghana’s private sector,” minority leader Haruna Idris said in a statement to parliament.

After his speech, opposition parties withdrew, refusing to vote.

The government estimates that the tax, which will cover mobile money payments, bank transfers, trade payments and domestic remittances, could collect up to 6.9 billion Ghanaian Cedis ($ 926 million) in 2022.

Analysts say the adoption of the electronic fee could reassure investors and lenders of Ghana’s ability to make difficult choices for income, helping narrow government government bond spreads.

Markets reacted immediately after the tax was passed. Ghanaian Eurobond prices rose as much as 2.77 cents to the dollar, reaching a high the day before Russia’s invasion of Ukraine.

But analysts say additional fiscal measures may prove necessary for Ghana to reverse recent economic woes.

Ghana, one of West Africa’s largest economies, is facing rampant inflation, currency depreciation and heavy debt burdens. His credit ratings have been downgraded due to concerns about the government’s ability to pass legislation to increase revenue.

“Recovering market access is likely to require a number of accurate fiscal data over the next few months,” said Amaka Anku, head of practice at Africa-based consulting firm Eurasia Group. “Electronic collection will help, but is not positive.”

In February, consumer inflation reached 15.7% year on year, the highest since 2016. Sedi has depreciated by about 20% against the dollar this year, behind only the Russian ruble, and public debt is about 80% of gross domestic product.

Last week, the government announced a major cut in spending to close the deficit, blaming the economic hardship on the COVID-19 pandemic and the war in Ukraine. read on

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Cooper Inven Report; Additional reports by Rachel Savage, Mark Jones and Rodrigo Campus; Author: Nelly Peyton and Sophia Christensen; edited by David Evans, Emelia Sitole Matarise, Marco Porter and Bernardo Oro

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