Prior to the implementation of the Electronic Transfer Levy (E-Levy), the Speaker of Parliament, Alban Bagbin, engaged in discussions with the Minister of Finance, Ken Ofori-Atta, regarding his strategy to include the informal sector in the country’s tax system.
According to Bagbin, the E-Levy was not the most optimal approach for ensuring tax compliance from the informal sector.
However, he suggested a tax rate below zero percent, as the majority of individuals in this category were the specific target of the finance minister.
During a meeting with Media General’s management in Accra on June 29, 2023, the Speaker of Parliament expressed that implementing a lottery tax could be an alternative method for the government to generate additional revenue for the state.
He elaborated that the lottery tax would involve customers using tax receipt numbers to participate in lotto games.
“I made it known to the Finance Minister long ago that there are so many areas where we can raise revenue, not E-Levy. But if you wanted to use e-levy, let us start from zero point something percent and then go up. You have an informal economy where a large percentage of the people are outside the tax net. Because of no documentation, you will never know their income, there are things that you have to do to bring them to the formal sector. I suggested to him the lottery tax,” Alban Bagbin said.
He added that, “The lottery tax is very simple, you use tax receipt numbers to play the lotto and every week, one tax receipt number will win and you can give a pickup to the person. So everybody now comes in because the person wants to win a pickup and so they start issuing receipts.”
“And so they formalize the informal businesses. Countries have done it, Malaysia and the rest and they jumped over 500 percent increase in revenue. I discussed this with the Minister,” the Speaker of Parliament highlighted.
Additionally, Bagbin pointed out that the government could explore other revenue-generating areas such as insurance and narcotics.
The government introduced the E-Levy as part of its efforts to enhance domestic revenue mobilization. However, in response to various criticisms, the E-Levy tax rate was reduced from 1.5% to 1%.
As per data from the Ghana Revenue Authority (GRA), the Electronic Transfer Levy generated GH¢246.9 million in revenue, contributing 11 percent to the projected GH¢2.24 billion for the year.
Since its implementation in May 2022, the E-Levy had accumulated a total revenue of GH¢861.47 million by March 2023.