Impact of Ghana’s mobile money levy
Governments all over Africa have been imposing mobile money levies in an attempt to secure more funds for the fiscus. Cameroon, Uganda, Tanzania, Congo Republic, Zimbabwe, Ivory Coast and Kenya have all imposed mobile money levies. Some countries have imposed levies but withdrawn them because of public outcry, like Malawi. In Cameroon, the IMF warned that a mobile money levy was regressive and would hurt the poor the most.
In May 2022, the Ghanian government introduced an e-levy of 1.5% on all mobile money transactions. Transactions that are less than 100 cedis (US$8.1) are excluded from the e-levy. On the 11th of January 2023, the government reduced the e-levy to 1%. Since the introduction of the e-levy, there have been studies looking at the impact of the levy on the poor. The finding has been that the levy is regressive, meaning that it impacts the poor disproportionately compared to their more wealthy counterparts. The next step would be to infer the magnitude of the impact of the levy from the decline in corporate revenue from mobile money fees. Lower fee revenue means lower transactions volume and ultimately lower corporate tax receipts.
MTN released its annual results for 2022 and we see the impact clearly: though the levy was only imposed on the 22nd of May, mobile money revenues declined by 12% for the 6 months ending June 2022 and by 28% between H2 2021 and H2 2022.
What does this mean? Aside from the issues around regressive taxation policies, it shows that mobile money consumers are price sensitive and that a small increase in price will have significantly larger impacts on demand (in economic terms, known as the price elasticity of demand). In short, the government of Ghana has a much smaller amount of money to tax from telecom companies and is also pushing its people towards cash and away from digital money – exactly the wrong strategy to adopt if you want to improve digital inclusion and inclusive economic growth in your country.
Really what we are seeing is that governments cannot resist the temptation to tax mobile money flows but that a mobile money tax is an ongoing, dynamic problem and unintended consequences are rife.