Enforcement of tax collection

… the institutional approach

The general attitude toward the payment of taxes by individuals as well corporate organisations worldwide maybe far from being said to be excellent in all situations. While there may be an appreciable level of compliance is some jurisdictions, the least said about others ,the better. In Ghana, the desired attitude toward payment of  taxes, that is voluntary, seems to be unattainable. Though there are indications of a sort that shows a measure of compliance by some individuals and corporate organisations,  the general posture of many toward payment of taxes is poor.

Ghana Revenue Authority, as the institution mandated by Act 2009, (Act 791) as amended to provide a holistic  approach to tax and customs, has over the years implemented various strategies aimed at enforcing tax compliance. For example, the goal of the Ghana Revenue Authority Strategic Plan for the past years has been the need to enhance voluntary compliance. Specifically, the second (2^nd) goal of the third (3^rd) Strategic Plan of the authority is “To Improve Customs and Domestic Tax Compliance”. The GRA’s fourth (4^th) Strategic Plan from 2023 to 2025 has  its second of six goals as “Enhance Compliance and Enforcement of Tax and Custom Laws”. Thus, the GRA is keen on ensuring that taxpayers on their own declare and pay their taxes voluntarily. However, with seemingly poor attitude of paying taxes, coupled with ignorance and low level of education, it is has become imperative on the part of GRA to enforce collection of these taxes.

Enforcing tax collection has, therefore, become very important aspect of any government’s fiscal policy. Taxes, as already known, are the primary source of revenue for most governments, and without effective tax enforcement, funding of important public services – such as healthcare, education, infrastructure and other development – may not be possible.

What is enforcement in tax administration?

Enforcement refers to a set of tools, activities and procedures employed to compel a taxpayer to comply with the provisions of the tax laws. These set of programmes are solidly based on the legal provisions used to administer taxes. It must be noted that enforcement actions are resorted to when all efforts employed to ensure voluntary compliance prove futile. There are various enforcement programmes adopted in various jurisdictions. These programmes employed by tax authorities are tailored to suit the level of tax tolerance within their catchment areas. In Ghana, there are a number of legal and administrative programmes and procedures deployed by Ghana Revenue Authority to correct non-compliance. Below are some enforcement programmes:

• Conduct Search, Seize or Arrest of offenders.
• Demanding of payments from Third Party Debtors (Garnishment)
• Creation and Extent of Charge Over Asset (Attachment / Distress)
• Application of Restraining Order (Seal-off)
• Civil Recovery/Prosecution (Court Processes)
• Recovery of Debt from a Receiver
• Recovery from Agent of Non-Resident
• Restraint of Person (Prohibition)

Roles of some institutions in enforcing tax collection

An institutional approach to enforcement of tax collection refers to the use of institutional structures and mechanisms to ensure compliance with the tax laws and regulations. It involves the establishment of institutions – such as the tax authorities, courts, and other government agencies – responsible for enforcing tax laws and collecting taxes. This approach to tax collection is critical in ensuring compliance with the tax laws. Thus the establishment of effective institutions and mechanisms to enforce tax laws and collection of taxes owed, cannot be over-emphasised. Each institution plays its role in the implementation of the enforcement programmes as required by the tax laws of the state.

1. The courts

The Revenue Administration Act, 2016, Act 915, from sections 41 to 45, sets out the processes and proceedures against any tax decision by the Commissioner-General (C-G). The courts are among one of such institutions for resolving disputes between taxpayers and the tax authority. The Ghanaian courts have made several rulings that has come to shape the administration of tax in the country. In order to fast track such tax cases, the Chief Justice designated some courts as tax courts. This was to disperse justice speedily as far as tax cases are concerned.

2. The Independent Tax Appeal Board (ITAB)

In a bid to improve the effectiveness of tax administration and enhance the tax dispute resolution process, the Parliament of Ghana passed an amendment called the Revenue Administration (Amendment) Act, 2020 (Act 1029), leading to the establishment of the Independent Tax Appeals Board (ITAB). The ITAB is to enhance the transparency and fairness of the tax objection and adjudication process, and reduce litigation pressures on the tax courts. The board is made up of 11 members.

A taxpayer dissatisfied with a tax objection decision by Commissioner-General (C-G) of the Ghana Revenue Authority (GRA) may, within thirty (30) days upon receipt of the C-G’s communication, appeal against the decision to the ITAB. A taxpayer who is dissatisfied with the decision made by the ITAB may within thirty (30) days from the date the decision was served seek redress in High Court. All appeals made by taxpayers to the ITAB shall be heard in camera. A decision of the Appeals Board may be made available to the public. Unless court orders otherwise, an appeal to the court shall not operate as a stay of execution of an order of the Appeals Board.

3. The security agencies – Police, EOCO and National Security

Section 5 (1) and (2) of the (RAA, 2016), Act 915 stipulate that: “The Commissioner-General (C-G) may request an officer of the public body, including the police, to assist tax officers of the Authority in the performance of functions”. Section 2 states that: “A public body that receives a request under subsection (1) shall take the necessary steps to provide the assisitance”.

The GRA has had several collaborations with the police, Economic and Organised Crime Office (EOCO) and the National Security in ensuring that tax evasion is minimised to the bearest minimum, if not eliminated. The Police, over the years, have been helping in apprehending taxpayers who load cargos with goods without any VAT invoice covering them. EOCO and National Security, through surveillance and investigation, always expose taxpayers who may have planned to evade payment of taxes.

4. Chartered Institute of Taxation – Ghana (CIT-G)

The Chartered Institute of Taxation, Act, 2016, Act 916 was enacted to established the Chartered Institute of Taxation, Ghana to regulate the practice of taxation in Ghana and to provide for related purpose. Thus, the knowledge acquired by members of this professional body, which is placed at the disposal of taxpayers, goes a long way to enforce tax collection. The CIT-G may help in shaping tax policies and make recommendations to government on tax related matters, especially during the institute’s Annual Tax Conferences                                                                                                                                                                                                                                                      Section 18 and 19 of the (RAA, 2016), Act 915 requires that only a person who is an approved tax consultant may represent a taxpayer, provide advice primarily regarding the interpretation or effect of a tax law, prepare a tax return, among others. When members of the CIT-G do these as required by their professional ethics, they are helping in ensuring to the ahearance to the tax laws.

5. Other institutions – The Ghana Immigration Service, Lands Commission, etc.

In Restraint of Person or Prohibition, where the C-G has reason to believe that a person who has failed to pay taxes due may leave the country, would by notice in writing, request the Comptroller-General of Immigration to prevent the person from leaving the country. Secttion 56 (2) of RAA stipulates that the Comptroller-General of Immigration shall, on receiving the notce, prevent the person from leaving the country. This role being played by the Ghana Immigration Service has saved the country from loss of tax revenue.

Section 52 of the RAA mandates the Chief Registrar of Lands to register a land or building when the C-G creates a charge over an asset of a taxpayer who fails to pay tax on due date. This complimentary role by the state institution goes a long way to help in the recovery of tax debt by this means.

                                                                                                                                           Some ways to enforce compliance by GRA

There are several ways by which tax compliance can be enforced. The quest to improve tax collection to, at least, measure up to a targetted  desirability level commensurates to the level within the sub-region had resulted in the operationalisation of measures that follow to achieve a Tax-to-GDP ratio of 17.5 percent by 2025.

1. Tax audit: Tax audit is said to be an activity whereby tax authorities review tax returns and financial records submitted  to ensure that taxpayers have paid the correct amount of taxes. Tax audits can be conducted randomly or targetted at specific groups or industries that are more likely to evade taxes. It can be comprehensive or issue based. Thus, any infraction identified during the audit is resolved  by the imposition of penalties and interest. Taxpayers who fail to pay their taxes or who provide false information on their tax returns would, thus, have to be subjected to penalties, fines or interests .
2. Penalties and interest: Another way to enforce tax collection is through penalties, interests and fines. Taxpayers who fail to pay their taxes or who provide false information on their tax returns may face penalties or fines or interests may be imposed on the principal for failing to pay on time, which can serve as a deterrent to tax evasion.
3. Digitalisation: In most jurisdictions, tax affairs are conducted via digital space. In the quest to satisfy the dictates of the Revenue Administration Act of 2016 (Act 915), Ghana Revenue Authority (GRA), in July 2021, went cashless as its offices stopped collecting cash from taxpayers. Taxpayers were required to pay at various banks after generating an invoice from the payment portal. Thus, the authority is using technology to enhance tax collection through the electronic tax filing of returns and subsequent payment systems, making it easier for taxpayers to comply with the tax laws.
4. Invoice invigilation: To ensure that businesses are complying with law requiring the issuance of VAT invoices as required by section 41 of the VAT Act, 2013, Act 870 as amended, personnel of GRA can be stationed at business premises to monitor the issuance of the VAT invoice. Currently, some selected business have been placed on the Electronic VAT Invoicing System (E-VAT) to capture all sales and account same to GRA. This programme is to protect the integrity of the VAT regime.

Conclusion and way forward

Enforcing tax collection can be a difficult task, especially in third world and lower income countries like Ghana, where tax revenue is low. The efforts to enforce tax collection is challenged by factors, such as limited resources for tax enforcement, corruption and lack of public trust in the government’s ability to use tax revenue effectively.

To address these challenges, governments may need to invest in tax administration and implement measures to increase transparency and accountability in tax collection. We are by this article calling on individuals, corporate bodies and organisations to demonstrate their willingness to obey the tax laws by filing theit tax returns as equired by tax laws. Let us play our role by discharging our tax obligations and remember that “our taxes are our future”.

References: 1. Compliance, Enforcement & Debt Management Manual, 2018. 2. Revenue Administration Act, 2016, Act 915 as amended 3. VAT Act, 2013, Act 870 as amended. 4. VAT Regulations, 2016, L.I 2243. 5. kpmg.com/us/en/home/insights/2023/01/tnf-ghana-inauguration-independent-tax-appeal-board/

The writers are staff of the Ghana Revenue Authority (GRA) with the Accra Central and Accra East Enforcement Units. They are members of the Chartered Institute of Taxation – Ghana (CIT-G). They can be reached on Tel No. +233 24 454 2671/ 24 220 5435 or Emails: [email protected] /[email protected]