By Ibrahim ASARE
A tax system refers to a set of taxes in force in a country at a given time or the set of principles and policies governments use to collect revenue from individuals and businesses.
The effectiveness and efficiency of a tax system is determined by the characteristics exhibited by the system and the extent of its ability to achieve its objectives of establishment.
A good tax system should meet five basic conditions, namely; fairness, adequacy, simplicity, transparency, and administrative ease.
This article seeks to analyse the conundrum surrounding the road and bridge tolls and proffer my recommendations to policy makers for consideration in their efforts to resurrect the tolls to raise the needed revenue effectively and efficiently whilst avoiding its associated pitfalls in its traditional collection method.
A brief history on road toll
According to Wikipedia, toll roads have existed for at least the last 2,700 years, as tolls had to be paid by travellers using the Susa–Babylon highway under the regime of Ashurbanipal, who reigned in the seventh century BC.
A toll road, also known as a turnpike or tollway, is a public or private road for which a fee (or toll) is assessed for passage. It is a form of road pricing typically implemented to help recoup the costs of road construction and maintenance.
Toll roads have existed in some form since antiquity, with tolls levied on passing travellers on foot, wagon, or horseback; a practice that continued with the automobile, and many modern tollways charge fees for motor vehicles exclusively. The amount of the toll usually varies by vehicle type, weight, or number of axles, with freight trucks often charged higher rates than cars.
Road tolls in Ghana
In Ghana, tolls have been around since the passage of the Tolls Decree, 1973 (NRCD 153) which mandated the Minister with the approval of the National Redemption Council, by a legislative instrument to make regulations: declaring any road to be a toll road; declaring any bridge to be a toll bridge; fixing the tolls to be levied on motor vehicle using such road or bridge; and exempting any class of motor vehicles from the payment of such tolls.
The law also exempted vehicles which belongs to the following institutions from the payment of the tolls:
the Armed Forces; the Police Service; the Fire Service; the Prisons Service; the Diplomatic Missions on reciprocal basis; government and mission hospitals and used as ambulances; and the Ghana Red Cross Society.
Although Ghana has about thirty-eight (38) toll booth locations with over one hundred (100) toll booths in number, the revenue collected over the period do not look encouraging.
Until the abolition of the road toll in the 2022 budget statement, the tolls were collected using the traditional means of stationing workers at toll booths for collection of the fees whilst issuing tickets to drivers who use such roads. This method raked in a paltry annual revenue of about Ghs72M.
Challenges on traditional road tolls collection in Ghana
The issues highlighted below are some of the challenges associated with the current system of road toll collection in Ghana:
- High vehicular congestion (traffic jam) resulting in health hazard due to the inhalation of toxic fumes by motorists whilst in queue.
- High economic cost to road users due to fuel burnt in long queues to pay the toll.
- High economic cost to the productive workforce of the nation due to the long-time wastage in queue at the toll booths.
- Low yield of collection due to avoidance schemes by road users.
- High cost of collection due to salaries of employees for collection and management fees paid to outsourced agencies.
- High economic loss to the state due to embezzlement of funds by various actors in the toll operations.
My proposed toll collection mechanism
Although there have been several proposals for the collection of the tolls, my recommended approach is for the imposition of the road toll to be added to the cost of road worthy certificate registration and renewal for registered motor vehicles in Ghana, and collection at the border entry points for foreign registered vehicles entering Ghana.
My proposed approach will address all the challenges associated with the traditional collection method listed above by:
- The avoidance of vehicular congestion on our roads at toll booths which will prevent the health hazards associated with inhalation of toxic fumes and other risks associated with the traffic congestion. The roads will be cleared for free flow of traffic since the collection points will be taken from the booths on the roads to the cash office for payment of road worthy certificates.
- Because there will be no traffic at the toll booths, there will be no economic cost to road users for staying longer in queues on the road to pay the tolls at the booths.
- There will be no economic cost to the productive workforce of the nation from increase in commuting hours because of the lack of traffic jams at the toll booths.
- This system will ensure that every motor vehicle registered in Ghana or foreign registered vehicles which enters Ghana shall pay their appropriate amount of toll irrespective of the type of road they usually use. Whether they use a road currently designated for toll collection or not, they will pay their toll so far as the vehicle is registered in Ghana or enters Ghana. This will address the current problem of avoidance and the toll collection will have a wider reach.
- The problem of high cost of collection and the payment of high management fees to outsourced collection agencies will be avoided because the Government will leverage on the systems and collection mechanism used by the Driver and Vehicle Licensing Authority (DVLA) for the management of road worthy by just increasing the amount payable for the road worthy certificate by the appropriate amount for the toll as determined.
- Since the current road worthy certificate collection method by DVLA is done by a contracted Bank, the problem of embezzlement will be curtailed due to the reduction of the number of collection points and the leverage on the integrity of the Bank.
Examining my proposed method with the five (5) criterial of a good tax system
As indicated in my introduction, a good tax system should meet five basic conditions, namely; fairness, adequacy, simplicity, transparency, and administrative ease. Below analysis seeks to examine whether my proposal will satisfy these criteria.
- Fairness, or equity: This requires that everybody should pay their fair share of taxes. There are two important concepts of equity: horizontal equity and vertical equity. Horizontal equity means that taxpayers in similar financial condition should pay similar amounts in taxes. However, vertical equity means that taxpayers who are better off should pay at least the same proportion of income in taxes as those who are less well off. My proposal ensures fairness by roping all vehicle owners into the tax net irrespective of their routes to pay their tolls through both vertical and horizontal equity. Vehicles of the same class by use of cubic capacity, axle load, gross weight or any other criteria will pay as its classified. The situation where road users who live and work in the urban areas do not pay tolls because most toll roads link rural or peri-urban areas to urban areas will be avoided.
- Adequacy: This means that taxes must provide enough revenue to meet the basic needs of society. A tax system meets the test of adequacy if it provides enough revenue to meet the demand for public services, if revenue growth each year is enough to fund the growth in cost of services, and if there is enough economic activity of the type being taxed so rates can be kept relatively low. The expected revenue can be ascertained, and the rate can be varied on periodic interval without huge administrative cost.
- Simplicity: This means that taxpayers can avoid a maze of taxes, forms and filing requirements. A simpler tax system helps taxpayers better understand the system and reduces the costs of compliance. My proposal is very simple to implement which may only require some administrative guidelines or a Legislative Instrument (L.I.) for its implementation unlike other proposals which will require the deployment of infrastructure and other technologies for implementation which are expensive and difficult to implement.
- Transparency: This means that taxpayers and leaders can easily find information about the tax system. With a transparent tax system, we know who is being taxed, how much they are paying, and what is being done with the money. We also can find out who (in broad terms) pays the tax and who benefits from tax exemptions, deductions, and credits. My proposal will ensure a deeper transparency. With information on the number of registered vehicles in Ghana in a given year, one can easily compute the amount of toll expected to be collected and a taxpayer can compute the amount they are expected to pay as toll levy for a period.
- Administrative ease: This means that the tax system is not too complicated or costly for either taxpayers or tax administrators. My proposal will be simple and easy process to be administered by the revenue authority with a low cost of collection and high yield.
Other laudable ideas from other school of thoughts
Some other school of thoughts have proposed the use of other methods like the use of technology to ensure electronic collection process and imposing road tariffs on the cost per litre of petroleum products. These are laudable ideas which may eliminate some of the challenges associated with the traditional collection method but may not be better than my proposal.
My take on these proposals are as follows:
- The use of electronic toll collection technology (Automation)
The use of toll collection technologies allow for the smooth collection and avoids some of the pitfalls of the traditional methods. Some operating automated collection systems available for deployment includes electronic toll collection system; video tolling; and connected vehicle technology.
All these methods requires the deployment of infrastructure like overhead cameras, wireless communication devices, dedicated short range communication technology, automated vehicle identification system, optical character recognition technology and the likes.
Deploying and maintaining these systems are expensive with high maintenance cost but they do not eliminate all the challenges enumerated above and will not entirely satisfy all the five criteria of a good tax system. Any glitch in the system will result in revenue losses.
- The imposition of road toll levy on petroleum products.
Some school of thought has proposed the imposition of a toll levy on per litre of petroleum products like petrol, and diesel. The former Vice President (Dr. Mahamoud Bawumia) expressed similar sentiments due to the potential of such proposal for raising huge revenues as compared to the traditional method.
A cursory look at the taxes, levies, and margins on fuel pricing indicates the following taxes and charges as part of the cost per litre: Ghana Energy Debt Recovery Levy; Energy Fund Levy; Price Stabilization And Recovery Levy; Sanitation And Pollution Levy; Energy Sector Recovery Levy; Special Petroleum Tax; Primary Distribution Margin; Bost Margin; Fuel Marking Margin; Marketers Margin; Dealers (Retailers/Operators) Margin; and Road Fund Levy.
All these taxes and charges are the main drivers of the high cost of fuel in Ghana and adding toll levy to it will cause the already exacerbated fuel price to undesirable levels with its accompanied cascading effects on the economy.
This approach will not achieve the desired equity, in that not all purchase of petroleum product are used to power motor vehicles on our roads and foreign vehicles on our roads which do not procure fuel in Ghana will not pay this levy.
Conclusion
From my analysis on the collection mechanisms espoused above, I conclude that although there are several approaches which can be used to implement the re-introduction of the road toll, the best approach which will ensure the desired outcome will be to incorporate the toll on the cost of road worthy certificate registration and renewal for vehicles registered in Ghana and levy foreign registered vehicles entering Ghana at the various border entry points.
Recommendations
Based on my analysis above, I recommend the government and stakeholders to include my proposal in their consultations with stakeholders on how to re-introduce the toll in an efficient manner.
This article is my personal and professional opinion as a Tax Practitioner in the discharge of my duties as a GHANAIAN CITIZEN who seeks the success of Ghana, and it is not a representation of the opinion of any institution.
(The author is a Chartered Tax Practitioner- a Member of ICAG and a Member of the Chartered Institute of Taxation Ghana).
[email protected]; [email protected]; @ib_asare; 0244 423 960
