© . Mr Isaac Siaw, 42, a store owner, visits customers at Makola Market, one of the country’s largest trading centers in Accra, Ghana, March 26, 2022. Photo taken March 26, 2022. REUTERS/Francis Kokoroko
By Cooper Inveen ACCRA () – Ghana’s parliament on Tuesday passed a new 1.5% tax on electronic payments known as the “e-levy” after the opposition walked out in protest. Finance Minister Ken Ofori-Atta proposed the e-levy to broaden the tax net in November and has presented it as a panacea for Ghana’s financial problems. The opposition was so fierce that it sparked a brawl in parliament a month later. Critics believe the e-levy will drive lower-income people and small business owners out of the digital economy, while Ofori-Atta said it was a way to ensure Ghanaians “contribute their fair share” to development. . Ruling MPs retabled the bill on Tuesday, when many opposition MPs were absent, a surprising move that analysts had previously said would be one of the few ways to pass the tax. It was expected to be resubmitted next week, but parliament speaker Alban Bagbin said it should be treated as an urgent matter and accelerated it. “This country’s financial institutions should not be subjected to this punitive, insensitive tax. It would be a barrier to Ghana’s private sector,” minority leader Haruna Iddrisu said in a statement in parliament. After he spoke, the opposition parties walked out and refused to participate in the vote. According to government estimates, the tax, which would cover mobile money payments, bank transfers, merchant payments and inbound remittances, could raise up to 6.9 billion Ghanaian cedis ($926 million) by 2022. Analysts have said the approval of the e-levy could reassure investors and lenders about Ghana’s ability to make tough choices to generate income, which would help narrow government bond spreads. The markets reacted immediately after the tax was passed. The prices of Ghanaian Eurobonds rose as much as 2.77 cents against the dollar, reaching their highest value since the day before Russia invaded Ukraine. But analysts say additional fiscal measures may be needed for Ghana to reverse its recent economic setbacks. Ghana, one of West Africa’s largest economies, faces rampant inflation, a depreciating currency and heavy debt. The company’s credit rating has been downgraded over concerns about the government’s ability to pass legislation to boost revenue. “Re-entering the market will likely require a range of strong fiscal data over the coming months,” said Amaka Anku, head of the African practice of consultancy Eurasia Group. “The e-levy will help, but is not unfavorable.” Consumer inflation reached 15.7% yoy in February, the highest since 2016. The cedi has depreciated about 20% against the dollar this year, second only to the Russian ruble, and government debt hovers around 80% of the gross domestic product. The government last week announced sweeping austerity measures to address the deficit, blaming its economic hardships on the COVID-19 pandemic and the war in Ukraine.