Towards an efficient tax administration

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Towards an efficient tax administration
Francis KYEREH
  • Adoption of technology by GRA
  • GRA must transform 14m TINs to Tax Accounts for Citizens/Residents

 This feature attempts to discuss the gaps that exist today at Ghana Revenue Authority (GRA) in terms of tax administration for the personal income tax category of taxpayers. This gap has facilitated the deliberate evasion by many citizens/residents in their contribution to taxes for the State. It is the civic responsibility of qualified citizens/residents to pay their taxes, but the GRA should make this process easier and efficient for everyone.

The President of Ghana and the Minister of Finance have recently publicly decried the non-payment of taxes by some professionals in the category of lawyers, accountants, architects, surveyors, engineers, etc. Like a pidgin speaker will say, ‘Na who cause ‘am?’  As I will demonstrate, the GRA has been the enabler of this deliberate evasion and avoidance of taxes by qualified taxpayers. All these years, the GRA has failed to transform Tax Identification Numbers (TIN) to transactional Tax Accounts that record transactions for certain categories of individual tax payers.

Today’s business environment is changing faster than ever due to technology adoption. Companies/organizations that are slow to adapt to rapid technology changes are being left behind like Ghana’s GRA and so the GRA must find a way to recover and move with the speed of change.

Tax Identification Numbers (TIN) for Citizens/Residents in Ghana

A Taxpayer Identification Number (TIN) is a means of uniquely identifying taxpayers or potential taxpayers (individuals and corporate bodies) for tax purposes. Section 10 to 12 of the Revenue Administration Act 2016, (Act 915), authorizes the Commissioner-General of the Ghana Revenue Authority (GRA) to maintain a Taxpayer Identification Numbering System of people who are liable to register and pay taxes to the State.

The Ministry of Finance and the GRA have over the years implemented tax policies that can expand/widen the tax net in Ghana. Tax policy experts usually speak to the press about how tax policy affects the profits and investment opportunities for SMEs. While they speak about tax to GDP ratios and technical jargons, the uncomplicated tax administration activities capable of widening the tax net that can be tackled with technology are left out of the discussion.

Since April 1, 2021, the GRA determined that the Ghana Card Personal Identification Number (Ghana card PIN) should be used as a form of Taxpayer Identification for Individual Taxpayers only. That means GRA has over 14 million tax identification numbers (TINs) in their TIN Numbering system. But, before the Vice President celebrates this achievement on his digitization efforts, it must be said that this achievement will not lead to improved tax payments unless GRA implements a transactional system that utilizes these TINS.

In the financial services industry, a TIN can be likened to a Bank Account Number (BAN). In this analogy, a Bank may generate a bank account number for a customer, but may never be used for transactions leading to a dormant account. The GRA has created millions of TINs (Account Numbers), but not really using them to record transactions for individual taxpayers.

Where GRA Failed in PAYE/PIT Tax Administration in Ghana

A visit to any GRA office for TIN registration can easily be done and maintained in the Taxpayer Identification Numbering System. However, any employee working in any corporate organization, who visits GRA offices to print their individual tax statement over the years that shows clearly all taxes paid on their behalf by their Employer after those taxes were deducted from their salaries/allowances will witness that the GRA has not yet deployed technology to mechanize this process.

Individual citizens/residents were required to register for TINs just about a decade ago after the Taxpayers Identification Numbering System Act, 2002 (Act 632). Since then, GRA has not been able to transform these TINs to tax accounts that record and track tax payments of individual persons in Ghana. There is nothing new under the sun in this current technology-driven world, and so the GRA must prioritize the use of a typical transactional system such as the ones used by Banks (core banking system) and SSNIT (pensions/contributors administration system) for PAYE and personal income tax payers.

Due to this gap of automation, it is possible many Employers have swindled/cheated GRA for years in not remitting the accurate amounts deducted from employees payroll as taxes. Stories about former employees whose taxes were not remitted to GRA even though their Employers deducted from their salaries are not hard to find.

In any case, why does the GRA differentiate between personal income tax (PIT) and Pay as You Earn (PAYE) as different categories of taxpayers on their website? Is not possible to have the same individual person working for a corporate entity and earning salary (and so liable for PAYE) and at the same time having an interest in sole proprietorship/partnership (and so making him liable for personal income tax)? Does GRA enable the two contribution sources for the same person (one from salary and one from sole proprietorship) to be made into the same tax account? Can a tax statement be printed showing this consolidation?

How GRA records Personal Income Tax for Employees working in Corporate Entities

I went to one GRA office/branch in Accra to request if it was possible for me to receive a printout of all taxes paid on my behalf by my employers over the last 5 years. I wanted to know and understand whether there is an automated system (Transactional system) for statement requests on regular basis just as SSNIT makes it possible for individual contributors to track their employee/employer contributions.

The feedback was that this is not currently possible for Pay as You Earn (PAYE) individual taxpayers like me, but rather possible for self-employed (Personal Income Tax) tax payers who may be in sole proprietorships or partnerships. The Officer explained to me that the taxes paid on my behalf are part of a big amount paid by my employer for all employees working in that organisation. GRA then receives a schedule from Employer of the individual tax contributions from the bulk amount paid earlier for all employees. Thus, my tax is part of a bulk amount paid by my Employer to GRA but, GRA does not extract the portion for me and credit my tax account (TIN).

Thus, even though a PAYE taxpayer honours his/her tax obligations facilitated by deductions and payment by an Employer (agent of GRA) to the GRA, GRA does not break down the bulk amount received from the Employer and credit the individual accounts of taxpayers (employees). Just as banks have a lot of dormant accounts to manage in their daily operations, the GRA is likely to maintain millions of dormant tax accounts, where tax payments may never be recorded, if technology adoption is not improved.

Technology Adoption for a True Tax Administration System

SSNIT uses the same approach as GRA to receive collections from employers. However, with a SSNIT number (analogous to a TIN number), one can visit SSNIT system and observe individual payments, and even make a printout of the past transactions on one’s account up to a period.

Why is the GRA not using a similar used by SSNIT to track the individual tax contributions of all individual taxpayers whose employers pay the taxes in bulk? Why has the GRA all these years not implemented a system that enables PAYE individual payers to check from the GRA system if their Employer has been remitting the correct amount of taxes deducted from their salaries to the GRA?

GRA should have a robust system with better technical capabilities than the transactional system SSNIT uses for individual citizens and residents who pay personal income taxes, whether PAYE or PIT. That system must be accessible by all PAYE/PIT tax payers from any browser in the world so that taxpayers can monitor if their Employer is even paying the taxes as collected and shown on payroll statements.

One should be able to make payments into their Tax Account (TIN) from any Bank or mobile money platform. One should be able to request for tax clearance certificates from a browser online. GRA’s system must be interconnected with banks/mobile money platforms for tracking incomes, ECG/Ghana Water for property taxes collection and monitoring, DVLA, Courts, etc. If such a system is truly put in place, citizens/residents can pay other taxes such as property taxes, gift taxes, other income taxes, all at the comfort of their homes, whilst their Employer continues to withhold and PAYE on their behalf as exists today.

GRA must have the largest contact (call) centre and business analytics platform in Ghana, monitoring individual tax payments (whether PAYE or PIT), and calling citizens and residents that do not pay their taxes. With complex data analytics and artificial intelligence platforms, GRA can easily monitor and track the income earning activities on individuals. This is the only way professionals like lawyers, architects, surveyors, and other worthy professionals can be tracked and fished out as tax defaulters or evaders.

Conclusion

In conclusion, let me acknowledge that the GRA appears to be tackling this problem. A visit to the Online Tools (File and Pay Taxes) section of GRA website shows that something is being done. However, the GRA must take the whole blame for poor transactional systems they have maintained on PAYE/PIT taxpayers and potential individual taxpayers all these years. The inability of GRA to ensure every TIN number is a true tax account that receives tax transactions for PAYE/PIT taxpayers in a mechanized manner is not in tune with modern times.

It is my recommendation that every individual taxpayer is transformed from being an owner of a TIN number to an owner of a tax account. That tax account must receive all tax contributions on behalf of that individual, whether working in a corporate entity, sole proprietorship or partnership. That tax account must consolidate all tax contributions from that individual  from all income sources because it is legally possible to earn income from multiple sources in Ghana.

The GRA must adapt to the speed of technology change, and enroll every citizen/resident in the scope of taxation in Ghana by ensuring that the 14 million individual TIN numbers made possible by the NIA Ghana Card currently sitting in a TIN Numbering System are transformed into 14 million tax account numbers that will be managed in a TIN Transactional and Administration System, where tax administration truly widens the tax net and pulleys in all citizens/residents capable of paying personal income tax.

About the Author:

Francis Kyereh is a Technology, Cybersecurity and Data Privacy Consultant with over 14 years’ experience in the financial and payments services industry. Email: [email protected])

 

 

 

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