Mobile money taxation and informal workers: Evidence from Ghana's E-levy

Abstract

Motivation: In recent years, governments in low-income countries have increasingly introduced taxes on mobile money transfers. These are often explicitly promoted as a way of taxing informal economic activity, but critics have noted their potential negative impact on lower income groups and specifically those in the informal sector. Yet there is virtually no evidence base on the effects of mobile money taxes on informal workers. Purpose: This article assesses how informal workers in Accra, Ghana, use mobile money and how they perceive Ghana's Electronic Transfer Levy (E-levy), introduced in May 2022. This provides a particularly interesting case study to explore the equity implications of the tax, as the policy was explicitly justified as a way of taxing the informal economy but also includes measures to limit the tax burden on lower income groups. Methods and approach: The article uses data from a survey of 2,700 self-employed informal workers in the Accra Metropolitan Assembly to capture citizen perceptions of the policy and to examine the likely impact of the E-levy on informal workers with reference to equity. Findings: Overall, our results suggest that the E-levy is highly regressive. Further, we show that most informal workers disapprove of the E-levy, reflecting not just concerns about its equity impacts, but also disappointment with the government's performance. Policy implications: Our findings suggest that taxes on digital financial services should be reconsidered from an equity perspective. While some policy measures, including those undertaken in Ghana, can protect low-income earners, they are often insufficient to counteract overall regressive impacts. Where they are implemented, social spending from the revenue from these taxes should target low-income populations in the informal economy, while governments should focus on building trust among informal workers with regard to revenue raising and spending