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Tax administration reforms from budgets and COVID-19

BY: Abeku Gyan-Quansah
Abeku Gyan-Quansah

With very bright prospects when the Minister of Finance presented the budget to Parliament in November 2019, little did anyone expect the COVID-19 pandemic to strike and send shock waves across the entire globe.

These bright prospects were reflected in the very promising theme of “Consolidating the Gains for Growth, Jobs and Prosperity for All” for the 2020 National Budget.

As COVID-19 had distorted several of Government’s initial plans, it was clearly time for a complete revision of the initial estimates in the 2020 budget.

Following from this, as in our previous series on indirect tax and direct tax policy measures, the series continues and attempts to explore the position of the initial 2020 budget estimate and the mid-year fiscal review, this time from the perspective of tax administration measures or proposals.

Tax administration measures that were introduced as a result of COVID-19 will also be touched on in this series.

In this particular series however, we will focus mainly on pre-COVID-19 tax administration measures for the 2020 fiscal year.

The COVID-19 tax administration measures and the 2020 Mid-Year Review on tax administration will be the subject of our next article in this series.

The 2020

Budget Statement

As a means of achieving the initial tax revenue target set by the Government, several tax policy measures were introduced to complement existing tax revenue measures.

The tax administration measures proposed included restructuring the tax system and developing a comprehensive revenue policy and strategy, reforming the Ghana Revenue Authority for efficiency and productivity, and the passing of the Revenue Administration Regulations and Transfer Pricing Regulations.

These are briefly discussed below, together with an indication as to whether the measures have been implemented as at the time of the presentation of the 2020 Mid-Year review in July:

Restructuring the tax system

To address the challenges of revenue mobilisation, the Government sought to restructure the tax system and develop a comprehensive revenue policy and strategy.

On average, over the last few years, the Government has missed its revenue targets although tax revenue has experienced some year-on-year growth.

In most cases, the Government attributed the shortfall in the total revenue to under performance in tax revenues.

It was therefore not a surprise that the Government was looking to restructure the tax system in a bid to address the challenges with domestic revenue mobilisation.

In our view, the restructure of the tax system should include exploring ways of broadening the tax net to include especially the informal sector, and a review of the current benchmark values system being operated at the ports.

We also recommend that the Exemptions Bill which was introduced during the first quarter of 2019 and aimed at streamlining and sanitising the exemptions regime in Ghana, be passed into law as soon as possible.

In addition to the above, it is our expectation that the restructure of the tax system will result in the employment of technology to make the tax system more efficient and taxpayer friendly especially as Ghana dropped four places in the 2019 World Bank Ease of Doing Business Report.

Reforming the GRA

Under this proposal, the Government intended to work with the new leadership of the Ghana Revenue Authority (‘‘GRA’)’ under a transformation programme centred on the three main themes of People, Technology and Service to create a “New GRA” that will reflect the very best of efficiency and productivity.

Prior to 2009, tax was principally administered in Ghana by three separate agencies - the Internal Revenue Service, VAT Service and the Customs, Excise and Preventive Service.

In December 2009, these three agencies were merged together with the Revenue Agencies Governing Board Secretariat in accordance with the Ghana Revenue Authority Act, 2009 (Act 791) to form the GRA.

Arguably, the creation of the GRA has resulted in some gains. Ten years on, a reform aimed at making the agency more productive is welcome.

We, however, hope that a credible statistical and economic impact assessment has or will be done to support the reforms. 10 years after the creation of the GRA, we are aware that the Domestic Tax Revenue Division has reorganised its offices by merging small taxpayer offices and medium taxpayer offices to create Taxpayer Services Centres (TSC).

The inclusion of “services” in the name of the merged office is encouraging and we hope that taxpayers will experience quality services when dealing with the merged offices.

We hope the GRA transformational themes of people, technology and services will be brought to light through the creation of the TSC and related units.

Passing the Revenue Administration Regulations

In the 2020 Budget, the Government proposed to introduce a Revenue Administration Regulations (“RAR”) and revised Transfer Pricing Regulations (“TPR”).

The 2018 Budget mentioned the introduction of Voluntary Disclosure Procedures (“VDP”) to waive penalties on voluntary disclosure by taxpayers and an Alternative Dispute Resolution (“ADR”) mechanism to resolve tax disputes between taxpayers and the tax authority.

The RAR has been replaced with an amendment Act, the Revenue Administration (Amendment) Act, 2020 (Act 1029) for the establishment of an Independent Tax Appeals Board and the introduction of VDP, amongst others.In line with global trends, we also have a new TPR.

We believe this will go a long way to help the Government in its quest to meet revenue targets.

Bringing it all together

From the above, you may notice that the Government has made some progress in implementing the tax administration measures proposed in the 2020 Budget.

The next article in this series will focus on the tax administration measures introduced post COVID-19 and the 2020 Mid-Year Fiscal Review.

For the Government to be able to meet its revised tax revenue targets, it is essential that the Government puts in place measures to ensure that our tax administration framework in Ghana is very robust to meet the uncertainties ahead.

The writer is a Partner in PwC Ghana and the PwC West Africa Indirect Tax Leader. He is a regular speaker on tax matters and faculty lead of the Tax Centre of the PwC Business School in Ghana.

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