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MoMo tax: it is normal, targeting must be done rightly – financial experts




Adnan Adams Mohammed


A financial expert has waded into the Mobile Money transactions taxation and claims it is as normal as how other companies are taxed on their operational profits.


The expert is for the taxation of MOMO transactions but advise that the target should be the profit made by the telecommunication companies and not the customers.


Last week, the Minister for Communication and digitalisation, Ursula Owusu Ekuful signaled that, the government is putting measures in place to properly tax digital transactions in the country, which includes MOMO, after it denied an intent of such last year. This has spark public agitation forcing some economists and financial experts to add their voice.


“All profits by companies need to be taxed – this includes profits from MOMO operations by Telecoms, which is similar to what banks do is move money around for a fee”, a former Executive Director at the Standard Chartered Bank, Alex Mould has justified. Adding that, “The taxation of the customer of a MOMO transaction is a Capital Tax – this should be avoided.”


He asked “Is this what is being proposed? If so, then we are entering a realm of Capital Taxation – normally a direction taken by a failing country, like what was proposed for Cyprus and Greece during the Cyprus financial crises?”


Mr Mould claimed that, the transactions fee the Telecom operators charge is astronomically high, currently about 1% , giving that they do not have any brick and mortar, nor service fees to private companies on moving cash around (via bullion vans), nor the risk of losing any money themselves  via theft.


In a recent interview, the minister noted that, it is time the country focuses its attention on taxing digital transactions to rope in some revenue to the state.


 “Let’s wait for the experts looking into the policy on taxing the digital economy to bring their report and then we can talk about whether or not we can tax the telecommunication networks for their services. As an operator, you definitely resist any attempt to pay additional taxes and of course, that is normal because a lot of people do not like paying taxes”


 “As policy-makers, we are looking at ways in which we can also maximize our revenue, the avenues for compromise are very limited, so let’s listen to both sides of the coin and allow the experts to also bring the middle grounds. The traditional sources of revenue that the government gets from Communication Services Tax is going down, the definition of what a communication tax is, needs to be reviewed in my opinion, because of the evolution of technology.


“The traditional voice review is also going down because today, a lot of people are using data platforms. For voice communication, hence the need to have a tax policy that can be rolled out on digital transactions platforms,” she said.


She noted that the demand on government for development projects are rising and the government needs to rope in revenue to develop the nation


Apparently, some members of Digital Finance Practitioners Association (Ghana) has also given admonishment to the government against the intent of taxing digital transactions.


Derek B. Laryea and Kojo Dougan, both members of the Association in a recent article juxtaposed that, if the policy intent, or proposal as shared by the Minister was to target revenues directly or transaction charges, experience shows that this attempt will lead to a pass-through cost back to the consumer and this will be inimical to our financial inclusion drive on the back of our growing digital economy.


“A tax on Mobile Financial Services (MFS), is simply a tax on the movement of money. Borrowing the words of the present government when it abolished the VAT on financial services in 2017; this tax will be a huge “NUISANCE” to every sector of the economy that leverages digital financial services too. This tax policy will discourage trade and commerce and retard the formalization of our economy. We need to always note if the tax interferes with financial intermediation, it will undermine our progress and strides chalked as a country in respect of financial inclusion.


“Equally, beyond increasing the cost of doing business in Ghana, it will hurt the marginalized citizens and discourage usage of mobile money services. For any sector or straight end service that employs over 400,000 direct and indirect individuals, one may need to relook the business model carefully before attempting to target it with a sector specific tax. The point here is there is no tax value that can account for or provide new livelihoods for the loss of employment to be occasioned should the tax on mobile money kick in today.”


Meanwhile, according some economists, for Ghana to create a competitive and effective tax system, the principle must be hinged on the quality of its tax laws and the way in which tax policy is made largely. They have on number of occasions suggested that, government’s revenue growth efforts should be done in a manner that is supportive of economic growth, employment and investment. It is always counterproductive to witness revenue growth policies competing with the greater objectives of economic growth.


But, Mr Laryea and Kojo Dougan are both wondering and questioned that, “how a tax on traditional banking as we know it to be the preserve of the middle and upper class be abolished and then be re-engineered back unto the laps of the lower class and informal economy.”


“In our study of Operationalizing Mobile Money, and experience working with all the mobile money operators in Ghana, what is clear is that, only about 40% of the large transaction volumes recorded and announced attract revenue to the service providers. A greater portion of these free transactions include cash in, transactions between distributors and agents for the purposes of liquidity management and let’s not forget the ongoing promotions like that of Vodafone Cash which are all free transactions.


“It seems quite unfair that while service providers are providing free transactions to grow their base and ignite usage within their networks, policymakers would be fixated on what they can get from what largely appears to be a free service for some. Let’s critique values and volumes in a sentence; if I send you GHC100 and you send it back to me and we do that 5 times each, this is recorded as volume being 10 times of transactions and the value of the (10) transactions being GHC1000. Lest we forget! this is the same 100gh we kept moving on the platform.


For the records, Last year, government launched three key policy documents namely, The National Financial Inclusion and Development Strategy, The Digital Financial Services Policy and The Cash-Lite Roadmap to drive financial inclusion as well as support growth within the digital financial services ecosystem.


Mr Mould including his comment on the raging debate, intimated that, “Soon this Government, in search of revenue, and if we are not vigilant, will impose tax on our bank deposits, and this could deter people from saving. What economic theory and principles is this Govt following?


He advised that, “Ghana needs a team of seasoned practical economists and finance/banking gurus to help lead the discussion before our economy spirals down a bottomless abyss, or black hole, into oblivion.”


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