As a financial consultant with extensive experience in West African banking, including advisory roles during Ghana’s E-Levy implementation in 2022 (a 1.5% tax on electronic transactions under the Electronic Transfer Levy Act, 2022 – Act 1075), I outline the impacts of taxing mobile money services. This tax, similar to those in countries like Kenya and Nigeria, aims to broaden revenue bases but affects financial inclusion. Below, I state and explain three advantages and two disadvantages, grounded in regulatory contexts like the Payment Systems and Services Act, 2019 (Act 987) and BoG’s fintech directives.

Advantages:

1. Increased Government Revenue for Infrastructure Development: The tax generates additional fiscal income, enabling governments to fund public services like roads, healthcare, and education, which indirectly benefit the banking sector. In Ghana, post-DDEP recovery in 2023-2024, E-Levy proceeds helped stabilize the economy, allowing BoG to support banks’ recapitalization under Notice No. BG/GOV/SEC/2023/05. This creates a more resilient environment for universal banks to operate, as seen in improved liquidity for institutions like Access Bank Ghana.
2. Promotion of Formal Banking Channels: By making mobile money costlier, the tax encourages users to shift to tax-exempt or lower-tax bank accounts, boosting deposit mobilization for banks. In practice, at Stanbic Bank Ghana, we observed increased savings account openings post-tax introduction, aligning with BoG’s sustainable banking principles to deepen financial intermediation and reduce reliance on informal systems.
3. Enhanced Regulatory Oversight and Anti-Fraud Measures: Taxation requires better transaction tracking, improving compliance with AML/CFT regulations under BoG’s directives. This reduces fraud risks in mobile money, as operators must integrate with systems like Ghana’s National Identification Authority. For banks, this means safer interoperability, as evidenced by reduced cyber incidents post-2020 Cyber and Information Security Directive, fostering ethical practices and trust in digital banking.

Disadvantages:

1. Reduced Financial Inclusion for Low-Income Users: The tax disproportionately affects unbanked populations in rural West Africa, who rely on mobile money for affordable transfers. In Ghana, E-Levy led to a temporary drop in transaction volumes by 15-20% in 2022, per BoG reports, pushing users back to cash, which hampers inclusion goals under Act 987 and increases operational risks for banks due to higher cash handling.
2. Increased Operational Costs and Evasion Risks: Banks and mobile operators face higher compliance costs for tax collection and reporting, potentially passed to customers via fees. This encourages evasion through alternative channels, raising fraud vulnerabilities. In real-world scenarios at Ecobank Ghana, we noted spikes in informal remittances post-tax, complicating risk management under Basel principles and potentially eroding profitability in a post-2024 recovery landscape.