About 1.5 million out of the six million eligible Ghanaian taxpayers pay tax. This makes Ghana one of the lowest tax to Gross Domestic Product (GDP) ratio in Africa. Ghana’s tax revenue to GDP was 11.5 percent in 2020 and is estimated to reach 13.4 percent in 2024.
According to the Institute of Economic Affairs (IEA), Ghana has a lot to do to meet the Sub-Saharan target of 17 percent which is above the nation’s 13 percent mark previous governments have over the years tried to upscale – with the country’s challenge of collecting less tax and relying mostly on external help: International Monetary Fund, World Bank, bonds and others.
Besides, Ghana’s total revenue (both tax and non-tax) to GDP was also 14.3 percent in 2020 and is expected to rise to 16.9% in 2024.
Governments’ effort in increasing revenues is the rolling out of new taxes. Although Ghana’s tax rate is high, the nation is not accruing enough revenue because of the low efforts in revenue mobilization – especially from the informal sector.
In the wake of the need to expand the tax net to generate more revenue, a combine statement issued by the National Identification Authority (NIA), Ghana Revenue Authority (GRA), and Registrar General Department on April 1, 2021, announced the commencement of the plans to replace the GRA Tax Identification Number (TIN) with the National Identification Authority (NIA) Personal Identification Number (PIN), known as Ghana card PIN.
This, according to the statement, is in line with government’s policy on the issue of a unique identifier for all transactions where the identification of an individual is required. Further, it said after the period of April 1 to December 31, all existing TINs will be replaced with the Ghana Card PINs. The statement adds that a Self-Service portal has also been made available on the GRA website for existing taxpayers who have registered and have been issued with Ghana card to link their Ghana card PIN to the TIN.
It is worthwhile to understand that while TIN is an identification number used by the GRA in the administration of tax laws, the Ghana card is issued by the National Identification Authority to both Ghanaian citizens (both residents and non-residents) and legally and permanent resident foreign nationals to show proof of identity, citizenship and residence.
To reiterate, what it simply means is that after the period of transitioning, the Ghana card PIN would be the sole identification for tax assessment in order to have a unique identifier for all transactions. And existing TIN holders who have Ghana card should go to the GRA website to port their TINs to Ghana card PINs.
Relevance of the transition
Even though rolling out Ghana card as a tax identification card expects some encumbrances, the idea should be to address them appropriately to potentiate the significance of its implementation, such as:
- Efficient revenue mobilization
The implementation should mark the beginning of digitization of tax in Ghana. As a matter of fact, the most valuable asset in the modern world is not gold or oil, but data. Many largest companies in the world are not manufacturers, wholesalers, retailers or landlords, but platform providers, data collectors and digital advertisers. The goal of tax digitization is to collect the maximum amount of revenue with minimum cost to the state. The transitioning from TIN to Ghana card would provide data statistics and information about the economy, for example, determining which assessable persons are and are not taxable.
On the other side of the efficacy equation, the transitioning could aid in reducing tax avoidance and evasion by providing unique identification of individual tax data. When combined with other mechanisms like withholding tax and withholding VAT in a proper way, it can loop in the informal sector (the biggest evaders of tax in Ghana). It may not necessarily make people pay the right amount of tax, but it will increase the taxpayer base.
Also, with increased digitization, using the bio-data provided on the National Identification System, data analytics can be employed to automate some tax audits and point GRA officers towards risky or potential evaders. This will hopefully reduce the unfair targeting of the compliant few.
- Minors contract
The legal framework regulating NIA PIN is different from GRA TIN. However, the two have to be merged for the purpose of tax law administration. According to Act 632, the issuance and application of TIN is for every person liable to pay tax.
Moreover, in view of Act 707, it is compulsory for every Ghanaian citizen living within the country and abroad to be on the National Identification System – in addition to non-citizens legally and permanently resident in Ghana – in order to show proof of identity, citizenship and residence. Furthermore, after the transition, it would be easier to uniquely identify and conduct the assessment on citizens and non-citizens.
Whereas the minimum age requirement for TIN registration is 18 years, that of Ghana card registration is zero (0) years and above. Therefore, one of the benefits of Ghana card PIN replacing TIN is that a minor can easily be identified to prevent him from entering into a contract which he lacks the capacity to prevent assessment– although he is not exempted from paying tax from the income of any employment, business or vocation he is into.
- Taxing non- Ghanaian-non-resident
Again, according to the Income Tax Act, 2015, (Act 896), it provides that a person is liable to be assessed for tax payment from the income of that person from any business, employment or vocation. In case the person is resident in Ghana, the source of his income tax liability is from his business, employment or vocation for the year, whether or not the source from which the income is derived has ceased. But if the person is a non-resident, he is liable to the extent of which his source of income tax is in Ghana. The Act also provides that an individual is resident in the country for a year of assessment if the individual is:
- a citizen, other than a citizen who has a permanent home outside of the country and lives in that home for the whole year;
- present in the country during the year for an aggregate period of one hundred and eighty-three (183) days or more in any twelve-month period that commences or ends during that year;
- an employee or an official of the Government of Ghana posted abroad during that year; or
- a citizen who is permanently absent from the country for a period of no exceeding one hundred and eighty-three (183) days, where that citizen has a permanent home in Ghana.
From the above, a person who is not a citizen of Ghana is liable to pay tax if only he is present in Ghana for an aggregate period of one hundred and eighty-three (183) days. What this means is that a non-citizen does not need a TIN to be assessed for income tax liability. With respect to Act 707, Ghana card PIN is issued to non-citizens who are only legally and permanent residents in Ghana.
Therefore, a non-citizen who is resident in Ghana for one hundred and eighty-three (183) days or more can or legally and permanent resident in Ghana can be assessed for tax using the non-citizen Ghana card he holds. In the same way, a non-citizen having Ghana card PIN who is not resident in Ghana can be be taxed if his source of income is derived or accrued in Ghana.
- Assessment of other jurisdictions
In some jurisdictions, there exist, side by side, an individual tax identification number and national identification number. For example, in the United States of America, individual TIN, is only available for certain non-residents and residents who cannot get a Social Security Number (SSN), whereas social security number is available for citizens. Thus, when you have a social security number, you do not need to have a TIN to pay tax. But, in Ghana, after the transition, the Ghana card PIN will be available for both citizens and non-citizens for tax law administration.
According to Benjamin Franklin, there are only two things certain life: death and taxes. While the truism of his statement is accepted, suffice it to say that the realization of efficient tax administration in Ghana is yet to unravel. Hopes are that, the replacement of TIN with Ghana card PIN would mark the beginning of achieving the goal.
>>>the writer is a research assistant at Center for Data Processing and Geo-Spatial Analysis (CEDPA), and a graduate of GIMPA Law Faculty. Email: [email protected]