Working Paper 146

In recent years, governments in lower-income countries have increasingly introduced specific taxes on mobile money transfers as a means to raise revenue. 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. Ghana’s electronic transfer levy (E-levy), introduced in May 2022, is a particularly interesting case study. It was explicitly justified as a way of taxing Ghana’s informal economy, but includes a 100 cedi/day threshold to limit the tax burden on lower-income groups. This paper uses data from a new survey of 2,700 self-employed informal workers in the Accra Metropolitan Assembly (AMA) collected in April and May 2022. We examine the likely impact of the E-levy on informal workers from an equity standpoint (with reference to earnings, gender and occupational sector), and explore how this relates to how it is perceived.

We find that, while the overall effect of the E-levy is highly regressive with users in the bottom quintile paying the largest share as a proportion of their income, the threshold is effective in sheltering some lower-income users from facing a new tax burden. We find that home-based informal workers are disproportionately burdened by the tax, relative to street vendors and market traders. Further, we show that most informal workers disapprove of the E-levy, reflecting both concerns about its impact on equity and disappointment with the government’s performance. Notably, while women are less likely to be liable for E-levy payments, they are substantially more likely to disapprove of its introduction.