Background:
To increase our tax-to-GDP ratio from 13% to 20% to match our peers on the Continent requires challenging the status quo. It requires making tough choices which would force people to leave their comfort zones. It calls for having a Quality Assurance Unit. A Unit that will watch the watchman and protect the taxpayer from abuse by some tax officers in GRA. The current manual system has led to leakages resulting in revenue losses between GHS700 million to GHS1 billion (McKinsey, 2019). This has led to poor taxpayer experience:
| AREAS | IMPACT |
| Registration | Up to 5 million unregistered taxpayers (both individual & entities) |
| Filing & Payments | GHS400-GHS600 million in uncollected debt due to bottlenecks, lack of transparency and inconsistent application of debt recovery actions |
| Compliance, audits & debt management | GHS300-GHS400 million in missed infractions and Post Clearance Audits due to absence of best practices in case management system |
| Customs | 30% deviation from number of audit target due to lack of clear tracking & monitoring as well as manual and heavily paper based processes |
| Reporting | Limited performance management due to lack of a single & consistent source of data for performance |
Source: McKinsey, 2019.
According to Tax Justice Network-Africa, Ghana losses an estimated amount of GHS2 billion from transfer pricing abuses from extractive sector. There is an estimated 1.6 million contributors in SSNIT’s database while GRA have 1.2 million people contributing to PAYE. Also, the informal sector is estimated at 70% of the economy but contributes only 7% of business income taxes to the State.
In recent McKinsey study, it is established that between GHS24 to GHS30 billion in taxes could be raised if system and processes were efficient.
| TAX TYPE | GHS’ BILLION |
| Corporate Income Tax (CIT) | 3-6 |
| Value Added Tax (VAT) | 13-14 |
| Customs | 5-6 |
| Personal Income Tax (PIT) | 3-4 |
Benchmark Indicator
| Item | LTO’s Current status | Peer Market Benchmark |
| Audit revenue per auditor | $2.4 million | $4.7 million |
| Taxpayers per auditor | 17 | 550 |
| Audit duration per taxpayer | 33 work days | 11 work days |
Purpose:
Some officers in charge of auditing in this Authority sometimes get away with unprofessional deeds and malpractices because, no one audits their work after they are done. Periods audited are never revisited and therefore, so many wrong doing during the audit period is buried upon the issuance of the audit report, now we want to resurrect these. This attitude is also affecting the level of self-assessment as over time, taxpayers have realized that, there is no motivation to declare tax liabilities accurately. There should be an “audit the Auditor concept” because once auditors know that their work may be reviewed periodically, they will not compromise on the integrity of their work and unsatisfactorily reduce tax liabilities. As the supervisory Ministry, MoF deems it fit to ensure that its supervisory role is achieved in this era of ensuring Ghana Beyond Aid and job creation. Over the years, the Ministry of Finance has really not played its supervisory role as expected but it’s ready now to ensure the rigorous supervision enshrined in the PFM Act going forward.
Next Step Rules:
- The creation of this Unit is to ensure that tax audits by officers are interrogated and reviewed to ensure audit quality is assured;
- To harmonised and streamline tax audit to avoid multiple of audits of the same tax types and same periods of the same taxpayer; the state must never be seen to be coercive for citizens to feel suppressed and subject to the whines of an uncoordinated GRA;
- To supervise, coordinate, manage and consolidate all audits in GRA;
- To promote and enhance best practices in tax audit and tax excellence with professionalism at GRA;
- To ensure tax audit compliance and enforcement reforms in moving Ghana Beyond Aid;