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

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.