With implementation of the digital address system via Ghana Post GPS and the expected roll out of a National Identification System, the 2018 budget must introduce innovative measures to make tax collection easier and attractive, a GN Research pre-budget analysis has said.
“The paperworks and the bureaucracy must be reduced to the barest minimum for the average tax payer. The budget should include measures to explore the possibility of using Internet portals, mobile-payments systems and ATMs to collect or pay taxes,” the research agency under Groupe Nduom said.
“This will reduce human interactions and reduce the length of queues at tax offices while eliminating barriers to compliance and corruption. This is why the idea of establishing a fiscal council is laudable. But, so far, government has failed in constituting the council as promised in the 2017 budget,” said the analysis signed by Samuel Kofi Ampah, General Manager of GN Research.
GN Research noted that one major obstacle that has inhibited these measures over the years is identification. “Now, the addressing system has been digitised via the Ghana Post GPS. Therefore, the 2018 budget should be able to achieve more success in broadening the tax net. This is not to underestimate the complexity of increasing the tax base in an economy such as ours,” he said.
Government budgets have faced implementation challenges due to shortfalls in revenue, and the 2017 budget is no exception. The tax reforms in the 2017 budget had a toll on government revenue collection which necessitated a downward revision of government revenue and expenditure estimates at the end of first-half of the year.
Domestic revenue fell short of the target for the period by GH₵2.7billion, representing 13.8 percent of GDP, driven mainly by a sharp drop in tax revenue.
Tax revenue fell short of the target by GH₵2.1billion, accounting for 75.8 percent of the drop in total revenue and caused mainly by shortfalls in income taxes and import duties. Non-tax revenue also fell short of the target, by GH₵527.6million -representing 19.4 percent of the total drop in domestic revenue. Grants from donor partners dropped by GH₵352.4million.
Despite analysts expecting government to introduce measures aimed at generating more domestic revenue for its operations, GN Research does not expect this to force government into introducing new taxes or increasing the tax rates on sectors that are overtaxed.
“This could erode expected gains from the measures implemented via the 2017 budget. We expect government to introduce policies to widen the tax base, especially by roping the informal sector into the tax net,” the analysis added.
Ways to increase the tax base
GN Research called for very practical measures to be introduced that increase the tax base and increase domestic revenue. “For a start, there should be a target for the number of new tax payers in the next fiscal year. This must take into account the existing number of tax payers in every region or district, and the number of new taxpayers added during this year,” the analyst noted.
The research firm, under Groupe Nduom, also called for the budget to announce measures that will make paying tax attractive by honouring tax payers with benefits such as priority in getting or renewing passports, driving licences, permits, vehicle and company registration, or extra services at airports and tourism centres, among others.
“The underlying factor for the successful implementation of every budget is performance of the revenue side. But the quest to increase revenue should not override the need to consolidate economic gains chalked up and return to a high economic-growth path.
“Therefore, the budget should demonstrate intent and ability to increase investor confidence by improving the business climate. It should also show government’s commitment to continue restructuring the country’s debts and reducing its fiscal deficit, and most importantly to achieve inclusive growth,” it said.