Claim: The Western Regional Minister, Kwabena Okyere Darko-Mensah, says the income of the average poor person in Ghana is GHC 70
After analyzing data from the World Bank and the Ghana Statistical Service on the living standards in the country, DUBAWA has found the claim to be misleading.
On Tuesday, February 2, 2022, the government held a town hall meeting in Sekondi-Takoradi to educate the public about the proposed electronic transaction levy and to persuade the people to accept its implementation.
The levy, which was introduced at 1.75 percent, will be on electronic transactions above GHC 100.00 and will be applied to mobile money payments, bank transfers, merchant payments, and inward remittances.
Speaking at the town hall meeting on Tuesday, the Western Regional Minister, Kwabena Okyere Darko-Mensah, debunked the assertion and insisted that the poor will not be affected by the tax.
According to him, the annual income of the average poor person in the country is GHC 70, hence the need for exemption from the tax.
His comments, originally in Akan, when translated to English will read:
“What I know is that, with this e-levy, the poor will be exempted. There is no poor person who will pay the e-levy. This is the analysis I made: In Ghana, when we say someone is very poor, it is someone who, at the very most, makes GHC 70 every year.”
Accra-based Joy 99.7FM has posted a short clip that captures the claim of the Western Regional Minister on Twitter.
The 1:18 seconds video has attracted 31.5K views, 244 likes, 621 retweets, and 233 comments.
DUBAWA first approached the Minister to provide the source of data which suggested that a person can be described as poor if he or she were to receive GHC70 annually.
“I only picked price points at GHC 70 as representing very poor people…the argument I was making was that poor people would not pay the e-levy. The 2010 population census puts Ghana’s poverty line at GHC 1,314 and so anyone who earns below that per year is a poor person,” he stated, adding; “that is why I intentionally said very poor people, just to make the argument that such people would not pay. Even at GHC 1,314.00 per year, poor people will be making GHC 3.60 (1,314 ÷ 365) per day,” he further clarified.
Dubawa subjected both his initial claim and clarification to scrutiny beginning with the 2010 population census and found the GHC1,314 clarification to be true as detailed in the following table.
Given the controversial nature of the e-levy and its potential impact on the poor, DUBAWA was interested in finding out two things;
- Whether the Minister’s definition of poverty levels was in line with internationally approved standards.
- Whether or not it is true that the poor as defined by international standards will be exempted from paying the e-levy.
The World Bank defines poverty as “the lack or insufficiency of money to meet basic needs, including food, clothing, and shelter.”
It adds that “poverty can be measured in monetary terms based on the monthly (or annual) expenditure of a given individual.”
This would mean that poor people spend up to about $693.5 per year ($1.90 x 365 days).
If $693.5 is converted to local currency, using the current Bank of Ghana Dollar to cedi rate of 6.1, the average poor person could be spending up to about GHC 4,230.35 per year and not GHC70 as initially stated by the minister.
Also, in 2019, the Ghana Statistical Service published its latest Ghana Living Standards Survey (GLSS7). The report provides information for understanding and monitoring living conditions in Ghana.
According to the report, the average low-earning person in the country expends GHC 872 annually.
“…the highest quintile has an annual average per capita expenditure of GH¢8,987 per person which is twice the national average of GH¢4,574 and ten times that of the lowest quintile (GH¢872),” page 198 of the GLSS 7 Main Report reads.
In the area of income, the report indicated that, on average, the poorest earns GHC 1,320 annually and that is also higher than the GHC 70 figure the minister initially mentioned.
Additionally, the report indicated that the average low-earning households receive GHC 564 from other sources such as social security payments, state pensions, or other sources from the central government such as the LEAP.
From the above, it is clear that per international standards, it is misleading for the minister to initially use GHC70.00 as the threshold for his definition of who a poor person is. It gives a different signal as to who will or will not be captured under the e-levy and that potentially could explain the reason for the controversy this claim has generated.
But it is also true that per the data from the World Bank and the Ghana Statistical Service, poor people will be exempt from paying the e-levy as stated by the minister.
This is because if $1.90 a day, which is the World Bank’s threshold for the poor, is converted into the cedi equivalent. The poor in Ghana are expected to receive GHC11 per day and that amount is lower than the GHC100 taxable by the e-levy.
Also, if the GHC 875 which is the Ghana Living Standard annual figure for poor persons is to be divided into 365, each person will receive a daily amount of GHC2.3 which is also lower than the GHC100 taxable under the e-levy.
Even though the minister was generally right about the poor being exempt from paying the e-levy, his decision to use GHC70 to define who a poor person is misleading.