Digitalising the economy – the ripple-effects on tax administration

multinational enterprises (MNEs)

The OECD has in recent years been at the forefront in developing policies that will cushion developing countries in earning fair tax revenues from multinational enterprises (MNEs). These policies include the BEPS and the Pillar 1 & 2. Majority of MNEs use complex tax strategies to avoid payment of tax mostly in developing countries due to the low capacity of tax officials.

The emergence of complex technologies intertwined with Artificial Intelligence (AI) and big data analytic tools have made modern taxation shift from brick and mortar to cloud taxation where enormous transactions are occurring at a faster rate. Ghana is yet to embrace the fast-moving cryptocurrency market, as well as the robust Transfer Pricing regime.

Ghana Revenue Authority (GRA), the constitutional established institution mandated with the collection and accounting of taxes has in this current period metamorphosised their tax administration from analogue to digital. These fast-moving paces include payment and filing online, the soon to implement e-TCC (electronic Tax Clearance Certificate), paperless clearing of goods at the ports, e-VAT, among others.

While it is envisaging these digitalisation measures will increase voluntarily compliance, it is very daunting to project how its impact will shore up tax revenue. The introduction of the Ghana Card Pin as TIN (Taxpayer Identification Number) was estimated to increase the taxpayer’s population from the mere 3 million to over 15 million. However, since its roll out, the revenue component has not yet been positively affected.

In Ghana, the implementation of policies aimed at digitalising revenue generation or collections, mostly have positive impact in the short term. It is instructive to note that the building of digital infrastructure will on its own be a ‘white elephant’ when the persons and users of those system are not roped in to understand its intended outcome.

The fast dynamic industry of software’s inculcated in AI makes it very challenging, especially in the case of Ghana. This is one of the major reasons why most digitalisation policies in the revenue space hardly succeeds in the mid to long term. However, to achieve the intended outcome, very robust measures have to be followed.

In the new modern economic theory, a technology introduction is envisaged to increase output exponentially ceteris paribus. Embracing digitalisation as a nation is not only necessary for revenue generation, but the added advantage of increasing GDP growth. Increased output will automatically lead to share prosperity of all citizens when the government actually uses the generated revenue for the betterment of the nation.

As GRA is gearing itself for the next phase of the digitalisation agenda which include, among others, the e-TCC, filing of all documents on the taxpayer portal, e-VAT, it is our hope these measures will decrease compliance cost and translate to revenue growth in the mid to long term. There is also the need for GRA to build the capacity of its staff, especially in the area of soft skills – like the Information Systems audit, cybersecurity, and big data analytics – in order to cope with the challenges that will arise from these policies.

>>>The writer holds MSc in Economic Policy; a member of CITG; Big Data Analyst with specialty in Predictive Analytics; and a staff of the Ghana Revenue Authority (GRA)

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