Ghana looks to tax OTTs

Ghana is looking to join the growing club of countries in Africa that have imposed taxes on OTTs. But there is a strange cognitive dissonance that government’s have on this issue and Ghana is a perfect illustration. The Minister for Communications and Digitalisation, Ursula Owusu-Ekuful has said: 

“We are determined to accelerate the use of digital technology, applications and service at all levels, build and protect our digital infrastructure, and enhance capacity and digital skills acquisition of our youth. As you may be aware, it is only through tax revenue mobilization that such investments and more can be funded”. 

It’s an odd statement because it assumes that it is only government via tax revenues that builds digital infrastructure and supports skills development. In fact, it is investment from the private sector that has made the mobile sector in Ghana such as success. Ghana is ranked 4th for a 300MB basket and 8th in Africa for a 20GB basket. It’s 3G and 4G coverage is reasonable. 

Figure 1: Ghana’s rank in Africa

If the Ghanaian government were serious about “accelerating the use of digital technology”, there is an easy step: remove the Communications Services Tax of 5%. This would lower the cost of access to digital services and increase total tax revenues. Figure 2 shows the impact of a 5% reduction. Overall tax revenues would increase by 19%. Removing the National Health Levy of 3.5% would increase tax revenue by more than 30%. In contrast, increasing excise duties by 5% would lower overall tax revenues by more than 20%. 

Figure 2: Figure 2: Impact of excise duties on taxation, GDP growth and employment

All of this data is publicly available on the RIS website along with our assumptions and sources for the model. If there is one message that comes from the data, it is that taxation has multiple impacts and the solution is not always to increase taxes.  

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