Trade experts analyze impact of E-Levy policy on AfCFTA trading

Norvan Reports, November 12, 2021

Trade experts analyze impact of E-Levy policy on AfCFTA trading

Trade Practitioner and AfCFTA expert, Louis Yaw Afful has opined that continental trading under the Free trade agreement would not be derailed by the introduction of the e-levy policy by government.

He explained that “the continental free trade area is not barring any country from doing something like that. In fact, Kenya is one of the countries that started this. These are internal means of generating of funds and does not infringe upon the activity of another member state by doing that.”

Mr. Afful however did say that “the only way it would have a negative impact on AfCFTA is where under the services sector such as telecommunications, different rates are applied for a Ghana-originating service provider and one from a different African country. That won’t be a fair practice under AfCFTA.”    

Speaking on Eye on Port, the AfCFTA expert indicated that the e-levy policy has been introduced by government as an innovative way of widening the tax net.

He said “because most of the trading in Ghana has been in the informal sector and government had to find ways to generate much internally. At the continental trading level this would not affect digital trading because the transaction is internal and not done at the border.”

Louis Yaw Afful, who is the Executive Director of the AfCFTA Policy Network (APN) said this move also aligns with the ambition for party states to increase internally generated revenues, as countries are to work towards 90% tariff liberalization.

He predicted that many countries participating in the AfCFTA would follow suit.

Taking his turn on the subject, the West Africa Regional Director, for CUTS International, Accra, Appiah-Kusi Adomako, did not believe that the e-levy is a panacea to the tax gap problem in Ghana.

“We have known in this country that when government is considering how to rake in money, the government approach has been the path of least resistance- the low hanging.  Here, that is the e-levy, which has become inescapable for everyone wired on the e-platforms. However, before you introduce any levy, you have to be guided by international best practices. The available literature shows that when a similar thing was introduced in Kenya, it had a negative repercussion on the country,” Mr. Adomako articulated.

He expressed that government may not have done a critical and holistic assessment of the impact of the e-levy before its roll-out.

The West Africa Regional Director, for CUTS International, Accra urged government to rethink the policy.

He said “already we are not satisfied with the 1% service charge taken by the telcos. At the other side of the Atlantic, when you send money from your PayPal or Google Pay, etc. you don’t pay any charges on them. However, you come to developing countries and multinationals are taking monies they could not have taken elsewhere. I think government have to have a full rethink on the e-levy in a way that it would not take us backwards in terms of the speed at which we are trying to digitalize the economy. A lot of people may be reluctant to use this channel because they may find it less expensive trading in and moving around with cash.”

The two experts nonetheless agreed that the rate applied to the e-levy is expensive and should be reduced, before implementation.

Appiah-Kusi Adomako proffered some recommendations on how Ghana can leverage the buoyant e-commerce space.

He said, “studies show that the appetite for people to go to the traditional marketplace is dying, and everyone is shifting to electronic commerce so government should be looking at how to integrate the traditional market into the e-commerce ecosystem so they can properly streamline their revenue collection too. Government can even consider introducing something like”  

Similarly, Louis Yaw Afful explained the benefits of the Pan-African Payments and Settlements System (PAPSS) for cross-border trading.

“PAPS is connected to all African Central Banks so that it is not about the currency value but rather the rate of denomination. If I am a trader here in Ghana and I want to transact with someone in Nigeria, unlike those days where you may have to go to Nigeria or denominate it in dollar before getting the Naira, PAPS will ensure you can send the money in cedis, and it would be received in their currency without going through these bottlenecks.”  

The Executive Director of the AfCFTA Policy Network however rated the institutional preparedness of Ghana for AfCFTA trading at 70% but urged the pillars of Boosting Intra-Africa Trading to be religiously followed for success.

The West Africa Regional Director, for CUTS International, Accra, Appiah-Kusi Adomako, on his part rated Ghana’s performance under AfCFTA at 80%.

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