In the face of challenging economic conditions in Ghana, the traditional approach of enforcing tax collection to meet or exceed revenue targets is increasingly proving to be counterproductive, A Financial Analyst and CEO, Keta Investment Promotion Center, Enyonam Adzo Apetorgbor, has said.
She said there is a need for a paradigm shift towards promoting and encouraging voluntary tax compliance as a sustainable and equitable strategy for the new Finance Minister, Dr Mohammed Amin Adams.
By fostering a cooperative relationship between the tax authorities and taxpayers, she added, the government can ensure a stable revenue flow, enhance public trust in governmental institutions, and contribute to a more resilient and inclusive economy.
“Our country’s economic landscape is characterized by its dynamic yet volatile nature, with harsh economic conditions posing significant challenges to both citizens and the government.
“The role of taxation in this context is pivotal, serving as a primary source of revenue for the government to fund public services and developmental projects. However, the prevailing strategy of aggressive tax collection has not only strained the relationship between taxpayers and the government but has also been inefficient in the long run. The appointment of a new Finance Minister presents an opportune moment to reevaluate and adopt a more sustainable approach,” she said in an article reacting the comment made by Dr Amin Adam to the Commissioner-General of the Ghana Revenue Authority (GRA), that he expects that to exceed the GH¢145 billion target outlined in the 2024 Budget.
Quite sincerely, he said, the Finance Ministry and the GRA need to urgently agree a roadmap to enable us to exceed the revenue target and meet pressing needs, including completing critical infrastructure.
Achieving and exceeding the targets is also critical to the success of the IMF-Extended Credit Facility (ECF) Programme. We cannot afford to miss our commitments programme, he said.
Dr Amin Adam said these when he paid a working visit to the GRA on Monday February 19, his first major working visit after replacing Ken Ofori-Atta as Finance Minister in the recent ministerial reshuffle done by President Akufo-Addo on February 14.
“I expect that we work together, through a structured framework, to exceed the GH¢145 billion target outlined in the 2024 Budget. Quite sincerely, we need to urgently agree a roadmap to enable us to exceed the revenue target and meet pressing needs, including completing critical infrastructure,” he said.
He added “It is also time to roll-out and expand the E-VAT mechanism, despite whatever challenges exist. We saw the potential collections from the Pilot Phase. We cannot continue to prolong and delay the implementation, especially under the programme. We must also work with renewed urgency towards reducing the human contact in the revenue processes and introduce a faceless assessment system. This is a sure way to give taxpayers a great experience and boost revenue mobilization.
“Commissioner-General, as you may be aware, the perception of corruption in the ports or trade and entry remains very high. I have seen reports that tend to confirm some of these perceptions. And I know you all have received similar reports. We continue to lose revenue through the actions and inactions of clearing agents, shipping companies and some of our own customs officials.
“I personally intend to visit the ports, together with some of your officers to engage and assess for myself some of the issues at first-hand. We need you to continue to instill discipline and minimize revenue leakages through misdescriptions, misclassification, and over and under-invoicing.”
But in a statement, Madam Enyonam Apetorgbor said “When tax authorities are overly focused on surpassing these targets, it can create a pressure-cooker environment that might incentivize tax collectors to engage in negotiations with taxpayers that are more about personal gain than about the fair and equitable assessment of taxes. This not only undermines the integrity of the tax system but also risks eroding public trust in tax administration.
“In the face of challenging economic conditions, the traditional approach of enforcing tax collection to meet or exceed revenue targets is increasingly proving to be counterproductive. There is a need for a paradigm shift towards promoting and encouraging voluntary tax compliance as a sustainable and equitable strategy for the new Finance Minister, Hon. Amin Adams. By fostering a cooperative relationship between the tax authorities and taxpayers, we can ensure a stable revenue flow, enhance public trust in governmental institutions, and contribute to a more resilient and inclusive econom,”.
Below is her full statement…
“Push to exceed Revenue Revenue Target” can be unproductive
The “push to exceed revenue targets” directive without fostering innovation can indeed lead to counterproductive outcomes in the realm of tax collection. When tax authorities are overly focused on surpassing these targets, it can create a pressure-cooker environment that might incentivize tax collectors to engage in negotiations with taxpayers that are more about personal gain than about the fair and equitable assessment of taxes. This not only undermines the integrity of the tax system but also risks eroding public trust in tax administration.
In the face of challenging economic conditions, the traditional approach of enforcing tax collection to meet or exceed revenue targets is increasingly proving to be counterproductive. There is a need for a paradigm shift towards promoting and encouraging voluntary tax compliance as a sustainable and equitable strategy for the new Finance Minister, Hon. Amin Adams. By fostering a cooperative relationship between the tax authorities and taxpayers, we can ensure a stable revenue flow, enhance public trust in governmental institutions, and contribute to a more resilient and inclusive economy.
Our country’s economic landscape is characterized by its dynamic yet volatile nature, with harsh economic conditions posing significant challenges to both citizens and the government. The role of taxation in this context is pivotal, serving as a primary source of revenue for the government to fund public services and developmental projects. However, the prevailing strategy of aggressive tax collection has not only strained the relationship between taxpayers and the government but has also been inefficient in the long run. The appointment of a new Finance Minister presents an opportune moment to reevaluate and adopt a more sustainable approach.
The Case for Voluntary Tax Compliance:
Voluntary tax compliance is the willingness of citizens and businesses to fulfill their tax obligations accurately and timely without coercion. This approach is rooted in the principles of trust, mutual respect, and a shared understanding of the importance of taxes in societal development. Several factors contribute to its efficacy:
*Economic Efficiency:
Voluntary compliance reduces the need for costly enforcement actions and administrative procedures, allowing for a more efficient allocation of resources.
*Equity and Fairness: Encouraging voluntary compliance helps ensure that all taxpayers contribute their fair share according to their economic capabilities, promoting a sense of fairness and equity.
*Sustainable Revenue Generation:
A tax system that relies on voluntary compliance is more resilient to economic fluctuations, ensuring a stable revenue stream for the government.
*Enhanced Public Trust:
By treating taxpayers as partners rather than adversaries, the government can foster a positive relationship with the public, enhancing trust in state institutions and the legitimacy of the tax system.
Strategies for Promoting Voluntary Tax Compliance
The Finance Minister can adopt several strategies to encourage voluntary tax compliance, including:
*Tax Education and Awareness:
Implementing comprehensive education programs to enhance understanding of the tax system, the importance of taxes, and taxpayers’ rights and obligations.
*Taxpayer Services and Support:
Providing accessible and efficient taxpayer services to assist individuals and businesses in complying with tax laws, including online portals, helplines, and advisory services.
Simplifying the Tax Act:
Streamlining tax laws and procedures to make compliance less burdensome and more straightforward, thereby reducing the cost and complexity of fulfilling tax obligations.
*Building Trust through Transparency and Accountability:
Demonstrating the effective use of tax revenues in public projects and services can motivate taxpayers to contribute their part willingly.
Under the harsh and unbalanced economic conditions, a shift towards promoting voluntary tax compliance offers a more sustainable, equitable, and efficient approach to achieving revenue targets. By fostering a culture of cooperation and trust between the tax authorities and the public, the new Finance Minister can pave the way for a stronger, more inclusive economy. This strategy not only aligns with the principles of good governance but also ensures that Ghana’s developmental goals are supported by a fair and resilient tax system.
My Recommendations :
The transition to a system that encourages voluntary tax compliance requires concerted efforts from all stakeholders. The government should prioritize tax reform that simplifies the tax laws, invest in taxpayer education, enhance transparency, and improve taxpayer services. Ultimately, fostering a culture of voluntary compliance is not merely a fiscal strategy but a commitment to building a more equitable and prosperous Ghana.
On the faceless tax assessment:
Promoting a faceless tax assessment system, which leverages technology to minimize direct interaction between taxpayers and tax officials, can enhance efficiency, transparency, and impartiality in tax administration.
However, it’s crucial to ensure that this system incorporates mechanisms for taxpayers to exercise their right to object or appeal against assessments they perceive as incorrect or unfair.
Enyonam Adzo Apetorgbor
(CEO, Keta Investment Promotion Center)
