E-Levy will tax VAT with every payment. Doubt it? Keep reading as we all get to understand how this will work out.
The infamous Electronic Transaction Levy (E-Levy) would overburden Ghanaians and also lead to the taxing of taxes you are paying if the levy is passed by parliament and you make payments with Momo or any other charged platforms.
While government and a cross-section of the Ghanaian people are excited about the E-lvey due to the tax revenue it will bring, others are very cautious of the dangers of its passage.
As the E-levy hangs in the air, many Ghanaians have kicked against it knowing the implications of it if passed by the government. One of the dangers is that, once it is passed many taxpayers will be taxed for paying their value-added tax when they buy goods and services and make payments through Momo or any other electronic payment platforms where the 1.75 e-levy is applied.
Let me explain this further. Look at this scenario.
Let us assume that I buy a service or product worth Ghs1000 and I am to pay a VAT of 12.5 which will be added to the gross value of GHS1000 for me to pay.
I am going to pay for the product using my Mobile money. I will end up paying an E-levy tax to the tune of 1.75% which will also be charged on the VAT of 12.5 %
Let’s look at how much you are paying for the product with a Sales Tax Rate in Ghana of 12.50 percent plus other charges before we conclude on this.
The value of the product before tax is GHS1000.00
VAT is (0.0125 * 1000)) = GHS125
VAT GHS125 plus price before VAT of GHS1000.00 is GHS 1125.00 if I pay using cash.
If I decide to pay with Momo
I will transfer GHS1125 to the seller which will attract an E-levy of 1.75% on GHS1125.00
Thus GHS 1125 *0.0175 = GHS19.68
My total cost is now GHS1125.00 + GHS19.68 = GHS1,144.68
This means I will pay an E-levy of 1.75 on the VAT of GHS 125 which amounts to 2.18 (125 * 0.0175) and also pay 1.75% on Ghs1000.00 which will add up to GHS17.50
Ordinary Momo transfer charges = 10.00 GHS
Total tax on the transaction is (19.68 + 125) = 144.68
A product that should cost you GHS1125 will now cost you (10.00+114.6+1125)= GHS1,249.6
Now, what happened is that, you have paid an E-levy tax on the 12.5% VAT as well as the gross value of your purchase. That is a form of double taxation however the tax is charged on another tax in this example.
How can you pay tax on tax? This is absolutely wrong.
A survey conducted by Ghanaweb has clearly sent a strong signal to the government as to what Ghanaians want. The post revealed that 83.14 % of respondents do not support the E-levy introduction. The government has however vowed to go all out to introduce the E-levy.
Passage of the E-levy many fear will introduce a continuous taxation regime of every purchase, payment, sales, and income that is done via Momo or any other electronic payments platform.
Trending on social is a content that has been titled “What people are not being told about E-levy” It outlines a set of effects that the introduction of the E-levy will have on the ordinary Ghanaian.
According to the post, …
1. E-levy is not only affecting MOMO
2. E-levy will affect your bank transfers.
3. E-levy will affect your ATM transactions.
4. E-levy will affect your online purchases.
5. E-levy will affect your personal account to account transfers.
6. E-levy will affect your online business transactions that involves the transfer of funds.
7. E-levy is 0.1% of the total monies received for COVID-19.
8. E-levy is 0.01% of the total money government has borrowed over the past 5 years.
E-levy will affect your online payments.
10. E-levy is going to affect the ordinary Ghanaians more.
Do you hold the view that E-Levy will tax VAT payments? Leave your comment regarding this.
Source: Wisdom Hammond