Ghana’s fiscal data between 2008 and November 2017 show that generally, the GRA has been unable to increase and sustain the momentum of tax revenue growth rate although, at prima facie, tax revenue generation increased year on year.
The trends in direct tax, indirect tax, and trade tax are worrying. That direct taxes in particular have generally declined since 2012 with minimum contribution coming from the informal sector and it’s evident that all things being equal, tax evasion remains a nightmare for the Ghana Revenue Authority (GRA) in raising tax revenues for the country.
While the problem of tax evasion may be behavioral, existing literature shows that challenges within tax administration systems and tax enforcement policies create the breeding grounds for tax evasion to flourish.
Executive Director of African Centre for Energy policy (ACEP), Benjamin Boakye, made these revelations in his presentation at a validation and stakeholders’ engagement workshop on addressing gaps to increase tax revenue in Ghana, under the Ghana Revenue Reform Programme (GRRP) on June 26th, 2018, in Accra.
According to Mr. Boakye, some of the gaps ACEP identified in Ghana’s tax administration system when they conducted a gap analysis within the framework of GRA’s processes and procedures, human resources, and tools were that, the GRA was bemoaned with procedural inefficiencies that hamper tax revenue mobilization in the short term. While late tax filing was behavioral on the part of taxpayers, the GRA also contributed to the challenge due to its inability to provide timely and adequate guidance to taxpayers.
He added that, the GRA failed to aggressively pursue filed but unpaid tax returns which were not in dispute, as well as outstanding conceded tax returns that were in dispute. Thus, penalties and interests on late payment cannot be enforced against the tax payer.
They also identified that, poor coordination and communication among GRA’s segmented office structures also affect tax enforcement, as well as poor monitoring coupled with weak field audits, amid low staff capacity and skills which left illicit financial flows undetected, especially in the extractive sector, while the large informal sector remained under-taxed.
“Weak coordination, poor knowledge sharing, and poor information flow remains a challenge of the GRA because the Domestic Tax Revenue Division and the Customs Division still see themselves as separate bodies and thus operate in silos. This has led to wide knowledge and capacity gaps among the agencies of the GRA.
Moreover, the GRA does not have adequate staff who have strong background in taxation. Yet the GRA has faced challenges recruiting and retaining qualified and trained staff due to political interferences and unsuccessful recruitment strategies.
The problem of limited staff numbers is compounded by frequent out-of-office trainings to the detriment of allotted time for daily operations. Finally, the Domestic Tax Revenue Division (DTRD) lacks the requisite technology to effectively ascertain tax obligations of tax payers, particularly those in Ghana’s large informal sector,” Benjamin Boakye added.
To improve on compliance checks and ensure effective audits, ACEP recommended that, a high profile audits should be done at the headquarters together with a team of Transfer pricing experts, and also encourage on the peer trainings.
Again, they recommended that, the GRA should collaborate with other state agencies to get better records and knowledge sharing for better management of tax evasion in Ghana, and as well as conducting more field visits by deploying more revenue officers.
“In the short term, the GRA should produce a simplified and user-friendly version of tax laws and guidelines. It may also conduct massive periodic tax education for citizens in collaboration with civil society organizations and the National Commission for Civic Education (NCCE). In the medium to long term, GRA should raise enough revenue to fund its own tax education initiatives through partnership with the media and private entities,” he noted.
Speaking on Small Scale Mining and tax evasion, he noted that, the tax policy inconsistencies and its associated implementation challenges. Citing a move by the GRA from collecting 10% withholding tax to a GHC500 quarterly postage stamp system, and later to 3% withholding tax which faced serious implementation challenges.
According to Mr. Boakye, ninety five percent (95%) of the small scale-miners ACEP interacted with, never received tax certificate for the 3% withholding payments to the gold buyers.
Others he said, did not even appreciate the significance of the tax certificate as a proof of payment to GRA. “There is also little incentive for small scale miners to have taxes withheld because gold buyers present higher prices if they do not withhold taxes,” he said.
He revealed that, “Some gold buyers and exporters have created a link to importers and foreign traders of general goods. In this relationship, merchandise dealers use their revenue from sale of goods (Cedis) to finance licensed gold purchases for export in exchange for Dollars abroad to ship goods to Ghana. Through this practice, they avoid compliance with regulations to repatriate cash proceeds from their trade. This practice persists because there is weak coordination and interface among the Minerals Commission, PMMC and BoG to track the quantity of gold produced, purchased, and how capital revolves within the gold export business.”
He said it was estimated that, Ghana loses $2.1 billion annually through tax evasion by corporate entities, multinationals, individuals, and other organizations operating in the country.
The Executive Director however, recommended that, the GRA should link taxes to participation rather than output by imposing a flat rate tax on small scale miners. This will invariably lead to accurate production data reporting and ensure effective taxation at the export level.
The BoG, MC, and PPMC, said, should also strengthen their collaboration and share data to facilitate proper tracking and regulatory compliance. And Citizens must be encouraged to be involved in the fight against smuggling of gold. If the incentives are right, citizens’ whistleblower activities will become a deterrent to, and raise the risk for, illegal buyers and exporters to operate.
“We propose that, 20% of value of gold seized through whistle blower action be awarded to the whistleblower while the remaining 80% goes to the State through GRA. Involving citizens in the fight against gold smuggling can reduce the cost of administering the tax.
The GRA should audit the activities of major foreign traders to trace foreign exchange activities. This process could make use of imports data trends on value of goods imported against bank transfers for the import of the goods. The Financial Intelligence Centre (FIC) could be an important collaborator in this exercise,” he noted.
Mr. Gershon Adela, the head of Communication at ACEP, at the event unveiled their digital platform called ‘Open Tax Ghana Platform, which was purposely designed to harmonize revenue mobilization in the country.
This platform, www.opentaxghana.com according to him, was launched in partnership between ACEP, Ghana Revenue Authority (GRA) and the United Kingdom Department for International Development, to provided opportunity for the public to share tax information and also report on all suspected tax evasions and its related cases in nationwide.