Widening the tax net, improving compliance: Some thoughts

The Income Tax Act 2015, Act 896, seeks to tax worldwide income of residents and permanent establishments in Ghana, just as it pertains in other countries. The tax law, therefore, conforms to global standards, which is good. The tax net should also be widened as it pertains in those countries on the global arena. 

In Ghana, payment of taxes is compulsory, unless the income or the person concerned is otherwise exempted. However, the registration for tax purposes has not been the best and again due to scattered nature of national databases, a lot more people who earn income and should be paying taxes are outside the tax net.  

It is said that only about 30 per cent of Ghanaians pay taxes and this calls for a more serious, non-political efforts to widen the tax net to reduce the tax burden on a few. 

All efforts to formalise the informal sector will yield more revenue for the state. Mobile money leading to expanded financial inclusion is a clear example for all to see.

Linking tax registration with voter registration 

We can link tax registration to registration for elections to rope in more people to pay tax. Our voting is based on the universal adult suffrage doctrine or principle. Adulthood in Ghana to be registered for elections is a citizen of Ghana who is 18 years and above, and of sound mind as stated in Article 42 of the 1992 Constitution. 

At that age, but for unemployment or other conditions, the person is ready to work and earn income that could be subjected to tax. Like the Social Security and National Insurance Trust (SSNIT) card given to prospective contributors when they are in school, Tax Identification Number (TIN) – (refer to TIN Act 2002, Act 632) – could equally be given to all potential voters who are earning income or will soon earn income to make tax collection easier and widen the net. 

If we can fight over various identity cards to exercise our rights as citizens of Ghana to vote, then shifting the fight to one’s willingness to register and pay tax sounds more beneficial to the economic and social forward march of the nation. 

One may quickly, given the Supreme Court ruling on the NHIS as unconstitutional to be used to register to vote, say that taxes are not paid by Ghanaians only. With that we can get the Ghanaians first and add other national earning income in Ghana. 

What is being suggested here is that the nationality of the person will be stated clearly at the point of registration and the Ghana Revenue Authority (GRA) can give codes to differentiate a citizen from a non-citizen of Ghana. 

With inter-ministerial or inter-agency collaboration, the Electoral Commission will agree to make this a condition for registration for future elections, obviously not the 2016 election.

Elections cost money and the tax revenue is one of the means by which the government finances it. It is, therefore, appropriate that the people who want to enjoy the right to elect leaders (president and legislators) to provide their needs be ready to register and pay taxes to finance the infrastructure and other social needs the politicians promise them.

Using trade/ professional associations to register for tax

There are various professional associations that the GRA can liaise with to get their members registered to pay taxes. These include the Institute of Chartered Accountants Ghana, the Ghana Bar Associations, Ghana Medical Association, Hairdressers and Dressmakers Association, Tomato Sellers Association, Ghana Institute of Engineers, UTAG, Association of Barbers, Ghana Kayayei Association, etc. 

The mention of the above associations does not mean their members do not pay taxes, but may not have duly registered as expected. For their members to be in good standing, the show of tax registration (TIN) and tax clearance certificates should be demanded, by amendment to their by-laws and regulations to incorporate that requirement.

Tax registration to access services

It should be made compulsory for one to produce evidence of tax registration and payment certificates to access services such as birth certificates, passport acquisition, election registration (as stated above), land title registration, clearance of goods, education for wards in both public and private schools, healthcare, except in emergency cases, etc. Some of these are already in the existing tax laws but enforcement is suspect. 

Let us look at how mobile money patronage has revolutionised the financial inclusion in Ghana within a short time. All those mobile users are expected to have registered with the telecom operators and this makes the telcos organisations with the largest number of Ghanaians in their database. Can there be collaboration there, given that those who have already registered could be isolated? 

In this regard, there should be proper public education to avoid tagging the telcos as the ones releasing their (customers’) information to the GRA for tax purposes.  

Networking all gra offices 

Where one’s mouth is, there the heart of that individual is supposed to be. Ghana’s mouth, apart from loans and grants with stringent conditions, is fed from taxes we raise from the citizenry and other persons who are not citizens. 

Adam Smith in his Wealth of Nations publication propounded the canons of taxation and it included convenience to the taxpayer. It is in line with this that the GRA has branches across the country to make it convenient to pay taxes everywhere a taxpayer finds himself or herself. 

However, the extent to which technology could be deployed to make tax payment more convenient seems to elude the revenue authority or is being done at a snail’s pace. The country continues to rely on so much paperwork. You want to pay your tax in peace and restriction will be put on you such as paying at specific locations like an LTO, MTO, STO offices. Why can’t we embark on branch networking like the banks to make it more convenient for their customers to have access to their accounts? 

This will make more time available to GRA to embark on registering more people into the tax net.

If a bank with branches across the country could network its operations within a year, why can’t the GRA, which collects more money for the state than what any bank collects from depositors? 

Can’t the smart-borrowing principle be extended to this project, since it is self-liquidating with a probable shorter payback period? Where our mouth is, our investment should be there also.

Tax payment statement 

It should be possible for a taxpayer to print his or her tax payment record just like social security contributions statement from SSNIT Website, and in that regard, if an employer has failed to pay social security on behalf of an employee, it could easily be detected for the necessary actions. 

Employees on the government payroll of the Controller and Accountant General’s Department could equally be downloaded and printed. Why can’t the GRA do same?

The system will go a long way to enhance tax collection and compliance because a diligent taxpayer could report any infractions to the GRA for the necessary follow up. It will also make the filing of tax returns and payment easier as one does not need to print forms and fill the return all over again and state the receipt numbers of the payments made months ago.

Our tax system should keep pace with technological advancement and not computerisations of a few activities such as TRIPS, GCNET, and the other platforms, that are isolated. Integrated systems help address tax evasions. 

The Tax Identification Number (TIN) should be used like the bank account numbers not just issued to taxpayers individuals) without using them.

Financing the tech advancement of GRA

The government should extend the “smart borrowing” or “Self-Liquidating” loans to finance the technological advancement of the Ghana Revenue Authority (GRA) to mobilise more money for the development of the nation. 

A good collaboration and revitalisation of the National Identity Card is a noble idea in the forward march. Let us invest where the payback is sure, short and certain. 

Let us invest where our mouth is and rake in more revenue locally because the international market could dry up or charge higher interest on loans. It would be less expensive to invest in technology to boost tax revenue mobilisation.

In conclusion, we can widen the tax net, not deepen the tax burden on taxpayers, and yet increase tax revenue to develop the nation for the betterment of all.

The author is a Chartered Accountant with keen interest in taxation, audit and risk management. He can be reached at: bartholomew.darko@yahoo.com