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Ghana’s mobile-money tax risks killing the golden goose, analysts say

By David Whitehouse
Posted on Tuesday, 6 July 2021 18:38

MTN is Ghana’s biggest mobile money operator. REUTERS/Siphiwe Sibeko

Ghana’s plan to increase taxes on mobile-money agents risks restricting the growth of an industry that has the potential to become a significant contributor to public finances, analysts say.

The new 10% withholding tax on cash-out transactions will be collected by telecoms companies from mobile-money agents. Implementation has been suspended until 1 September after having initially been introduced on 1 July and then rolled back, according to the Mobile Money Agents Association of Ghana on its Facebook page.

Initial protests have caused a delay, but as it stands, the government’s intention is still to introduce the tax. The government sees mobile money as an “easy way” to raise revenue, but “taxation is not the way to go at this point,” says P. K. Senyo, a Ghanaian senior lecturer in information systems at Southampton University in the UK.

“The time is not right” for the tax increase, as Ghana has not yet maximised mobile-money use, he says, estimating that only about half of the population are active users of mobile money.

Ghana is in the process of rolling out a quick-response code payment system to enable consumers to make instant payments from bank accounts and mobile wallets. The programme is currently free, but Senyo fears that the tax could hurt take-up if people fear that charges will later be introduced. “This is not the time to introduce taxes on the agent.”

  • Ultimately, Senyo argues, the government should tax cash-outs, but that point has not yet arrived. Senyo argues that an active use rate of about 90% needs to be achieved first.
  • It is possible that the tax will deter some people from using mobile money, Senyo says. But in many cases, he adds, people have no alternative.
  • “The government needs to think outside the box and widen the tax net,” adds Senyo.

Ease of use

The tax is understandable given the impact of the pandemic on public finances, says Derrydean Dadzie, a fintech consultant in Accra. But, he says, the market dynamics of mobile money will be affected by the move.

In the short term, agents may pass on the levy to consumers, but this will push customers to explore cheaper ways of doing the same transactions, says Dadzie. “The agency market may take a hit in the medium term.” Someone will have to “take the bullet” and the mobile network operators could meet agents halfway, Dadzie suggests.

Senyo’s research argues that people are ready to use mobile money if the effort involved is small. Conversely, if the obstacles to use increase and there are alternatives available, people will turn to them, Senyo says.

The danger is that the tax increase comes on top of identity controls for mobile-money users. Since the start of April, MTN, the country’s largest mobile-money operator, has required ID cards for mobile-money withdrawals.

Senyo argues that there are better ways to address fraud.

  • Those seeking to carry out illegal transactions, he says, will easily be able to use fake IDs because of the limited integration of national databases.
  • Further, identity papers in Ghana are not properly connected to residential addresses.
  • A more promising approach, Senyo argues, would be to use artificial intelligence and machine learning to flag suspect mobile-money transactions.

Bottom line

Those on the borders of financial inclusion are most likely to suffer when the tax is finally introduced.

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