This strategic move comes as part of the Medium Term Revenue Strategy aimed at enhancing the efficiency and effectiveness of taxation policies.
The e-levy was introduced in May 2022, initially met with significant public resistance due to its taxation of mobile money transactions. It was structured as a 1.5% charge on electronic and mobile money transactions exceeding ¢100 per day. The primary objective was to bolster government revenue by imposing higher tax contributions on the informal sector.
However, in January 2023, the government reduced the e-levy rate from 1.5% to 1%. The levy included an exemption threshold for transactions below ¢100 per day, a feature expected to be removed in the upcoming overhaul.
The redesign of the Electronic Transfer Levy aligns with the government's broader modernization agenda for revenue collection methods. It aims to ensure a fair distribution of the tax burden across various sectors of the economy.
In addition to the e-levy reform, the Medium Term Revenue Strategy proposes several other key tax reforms:
- Broadening Withholding Tax Regime: The strategy seeks to extend the withholding tax regime to cover various tax types. This expansion aims to enhance taxpayer identification, streamline tax collection, and simplify filing procedures, particularly for incomes within the informal sector.
- Streamlining Tax Returns: Efforts will be made to simplify tax return processes and improve the modified taxation system to minimize tax avoidance and encourage voluntary compliance.
- Review of Outdated Tax Categories: Outdated tax categories such as stamp duty, income tax stamp, and vehicle income tax will undergo thorough review and adjustment to align with current market dynamics.
- Enhanced Taxation of Rental Income: The strategy includes measures to ensure a fairer contribution from the rental income sector.
- Taxation on Gross Gaming Revenue (GGR): For industry players, taxation on Gross Gaming Revenue will be implemented, along with the introduction of withholding tax on winnings, marking a significant step toward a more comprehensive and equitable tax structure.
The comprehensive redesign of the Electronic Transfer Levy and the broader tax reforms signal the government's commitment to modernize revenue collection while promoting fairness and equity in taxation.
These changes aim to enhance revenue generation and strengthen the country's financial position.