- Dr. Ampaabeng described the tax administration system in the country as a weak, bureaucratic and complex system.
- GRA, especially auditors, should be rotated regularly to avert any susceptibility.
- GRA is not autonomous in handling complaints against their officials.
- The biggest challenge Dr. Ampaabeng identified was the inadequate education on taxes.
- The cost of broadening the tax net becomes burdensome for the ordinary Ghanaian and tax payer.
- Tax exemptions grew from GHC392 million to GHC4.6 billion in 2018.
|A Taxation and Fiscal Policy expert at Oxfam International (Ghana), Dr. Alex Ampaabeng, has raised concerns over the structure of the newly inaugurated Tax Audit and Quality Assurance Department at the Ghana Revenue Authority.
Dr. Alex Ampaabeng- Tax and Fiscal Policy expert (Oxfam)
The Minister of Finance, Mr. Ken Ofori Atta, recently inaugurated this department with a mandate of ensuring a centralized audit planning process and guarantee quality auditing at the GRA. The new department is also tasked to enhance transparency in the tax terrain, with the principal aim of eliminating corrupt acts at GRA.
But speaking in an interview with The Vaultz News, Dr. Ampaabeng, raised issues on why a department which was supposed to act as a check on staff of the GRA would be placed under that same GRA.
“You want to establish a body to oversee the work of GRA but then it is run by GRA, so this is self-regulation. These guys will have their own colleagues… in the same building so how do you expect them to be so different from what we know of GRA.”
He was of the view that the department should have been placed under the Ministry of Finance or under the new Fiscal Responsibility Council. Dr. Ampaabeng also noted that the introduction of this department would not in any way solve the tax administrative challenges in the country.
“Corruption is the reason why they’ve established the unit and it’s just one aspect of the challenges we have in our tax administrative system,” he noted.
Weak Tax Administration System
Dr. Ampaabeng described the tax administration system in the country as a weak, bureaucratic and complex system which did not also embrace current technology.
For him, “it’s not always about corruption or abuse of GRA staff powers that are challenges in the tax system. We have a tax system that is very complex, a system that we lack information about tax payers… we have a tax system that is built on a very poor tax education”.
Also the challenge of taxpayers being oblivious of the facts on payment and duration further complicates the workings of the unit. He said, “In 2020, we have one of the worse ICT system that has one of the worse ICT system-usage in the world”.
Some infractions certain staff from the tax authority indulge in coupled with the poor use of ICT was highlighted by Dr. Ampaabeng. He said “One of the key loopholes or challenges I noticed was that there’s a very poor usage of ICT and most of the loopholes are the result of the human interface. We have GRA staff going around handling cash… where in the world will any serious tax authority allow staff to hold cash or issue receipts and collect money”.
Accordingly, he suggested staff within the GRA, especially auditors, should be rotated regularly to avert any susceptibility to corrupt act and the need for ICT usage to be entrenched in processing of individuals to forestall encumbering people unnecessarily with their shortfalls when filing their tax compliance.
Despite other pressing issues on the organization such as corruption and leakages, he expounded on the key challenges and complexities in the tax system by expressing the misgivings over lack of proper help with information on GRA websites. “We shouldn’t be doing what other developed countries are doing and expect a different result in Ghana”, he added.
As a result of the basic stipends of taxpayers, he advised, “when it comes to small businesses, make the tax as easy to understand as possible… as people will have to rely on tax experts.
“So the complexities, lack of information about tax payers, poor tax education, low ICT are to me some of the fundamental challenges in the Ghana tax system. Corruption which is the reason why they’ve established this unit is just one aspect of it,” he further revealed.
That notwithstanding, he recommended absolute surveillance of the unit and as a result, the quality assurance department should be well-positioned to handle that.
The complaints and customer service in the GRA was also another problem he identified by insisting that, it is not autonomous in sincerely addressing the complaints of individuals who report officials who work in that same organization.
He said, “ Establishing a quality assurance unit is fine but if it’s for internal purpose, it is for engaging the broader public versus GRA, then putting it under the control and inside GRA to me will not yield anything new”.
Solutions to mitigate the challenges within the tax administration unit, he suggested, can be implemented by creating niche tax education content for individuals as against the current generic information at GRA.
Lack of proper tax education
The biggest challenge Dr. Ampaabeng identified, was the inadequate education on taxes which are hinged on, lack of tax information and poor ICT system usage as people do not even understand complex tax issues and information which are churned out by the Authority via the media.
Due to the lack of proper education, taxpayers and visitors who visit the GRA website become clueless as they have little or no knowledge on tax jargons on GRA website which are also pushed to other media outlets, hence the need for these individuals to outsource to tax accountants.
Dr. Ampaabeng was of the opinion that due to poor tax information, people are forced to hire an accountant who might charge a ridiculous amount for tax returns.
“When it comes to small businesses, the advice would have been, make the tax simple and easy to understand as much as possible, but where people have to rely on tax experts, and then they tend to fault. So the complexity, lack of information about tax payers, poor tax education, low ICT are to me some of the challenges in the Ghana tax system. And corruption which is the reason they’ve established this, is just one aspect of it.”
He further stated that, “practical or physical tax information is not there… but now things are getting better”. In comparison to other countries website he was of the view that these websites give comprehensive information of the intricacies of tax as against GRA’s website.
According to him, the only way we can bridge the gap is by “ engaging the local media, if it’s the Twi radio or the Ga radio… and make the tax education content and context specific. It is not about just putting information just for the sake of information”.
He further advised that the tax information should be in the local dialect, churned regularly and made easy to understand for all and sundry, especially those who are uneducated. “There should be regular tax education. Engage the media and see how best you can improve tax education”
Broadening the Tax net
Government in recent past have tried to bring in tax reforms to widen the tax net and there have been extensive discussions on broadening the tax net in budget reading.
According to the tax analyst, the concept of “broadening tax net” in the first place has been misunderstood and that the context of “broadening the tax net has been confused with “increasing the tax rate”.
He said, “When you talk of broadening the tax net… you broaden the tax base in a way that more people will be caught in the tax net for them to pay taxes. But when it comes to Ghana, they confuse broadening the tax net with increasing the tax burden on the people who are paying, and normally it’s about the indirect taxes which we tend to push up”.
The cost of broadening the tax net becomes burdensome for the ordinary Ghanaian and tax payer who’s trying to make ends meet, as it puts more strain on the poor.
He explained that “we used to have VAT which companies could use straight line method to calculate, now we split the VAT into a 12.5% VAT in addition to 2.5% NHIL and 2.5% GetFund which are now straight line and its non-deductible”.
Aside the broadening of the tax net, Dr. Ampaabeng suggested that “we need to look beyond the conventional,” by incorporating some other revenue generating activities such as property taxation and also the reintroduction of the luxury vehicle levy bill which is fetching advanced countries quite huge revenue.
He further noted that the challenge inherent in this activity increases cost of doing business; it puts more strain on the poor.
“So increasing the tax net is not about pushing the tax rate higher or increasing direct taxes to burden the very poor; it is about looking for more potential.”
Essentially, he stressed on the relevance of the Luxury Vehicle Levy as a lucrative venture which should be reintroduced with the focus being on real luxury vehicles and not just tax based on engine capacity. He said, “ it was a wonderful tax but it was poorly implemented”. He also proposed the cutting of the Common Fund of District Assemblies and encouraged them to tax properties in their area to fund their activities. Digitized taxation system was also proffered by him.
Tax exemption ruckus
According to Dr. Ampaabeng, the tax exemption bill was born out of a decision made in Parliament to justify who qualifies for the tax exemptions, which is weighed based on documentation, payment and clearance of goods. However, it was reformed based on an IMF condition for providing a bail-out.
|The reason the tax exemption bill hasn’t been passed is because, “IMF is no longer there to give us the pressure and number two there’s no political will".
“In 2010 we gave away a tax exemption of GHC 392 million… in a space of eight years the exemption grew by 1,073%, that’s the seriousness of it. It grew from GHC392 million to GHC4.6 billion in 2018, yet to see 2019, but definitely 2019 will be around GH 5 billion or more”.
He said “this exemption 4.6 billion could have fully financed the free senior high school completely and it could have also financed the road network Ghana wanted”.