Monday, 13 November 2017

Tax expert slams gov’t ahead of budget reading

Image result for Abdallah Ali Nakyea

As the finance minister prepares to read the 2018 budget to parliament, some hints coming out which are likely to be captured in the budget are; communication service tax will go up. Which means mobile voice and data will become more expensive

The tax net is expected to be widened. The income tax threshold will be brought down, meaning more-lower income earners will now be taxed.

Also, as already announced, corporate tax is expected to be reduced, a welcome news for the rich and business elites.

In effect, more poor people will now pay tax while the rich people will escape it or with a slap on their wrist!!

However, Abdullah Ali Nakyea, a tax consultant has described this proposed taxes expected to be captured in the 2018 budget as an unfortunate situation. “This is unfortunate situation indeed when the marginal propensity to consume (mpc) is higher for the poor than the rich. Growth of the economy will slow down with these tax proposals unless the Savings by the rich can be harnessed and channeled into investments to create jobs for the poor.”

“For me we have had enough of Tax Policy mix over the years, none of which has seen implementation to the last word of the Policy. If we look at the past 5 budgets over the last five years, we will see “widening the tax net”. Yet the statistics that the Commissioner- General of the GRA gave at the just ended CATA conference at Movenpick Ambassador Hotel shows that our tax net is still where it is”, he said.

Ghana had a taxpaying population of 4million two years ago with only 2.5million paying taxes (according Dr Larbi-Siaw - Tax Policy Advisor at MoF). Last year, the figure increased to 4.5million yet only 1.5million were paying taxes. This showed that as the taxpaying population increased, the number honouring their tax liabilities declined showing that tax compliance is the key tax policy to be pursued because if all the people required to pay Tax comply with their tax obligations, with the statistics above we can as country more than double our domestic revenue mobilization. It is only when after such compliance policy efforts we raise all the revenue we need and yet need more that we can then consider the next policy of widening the tax net.

Currently what we have ended up having is “Tax deepening” because the same people paying taxes and those being burdened with more taxes hence they either go out of business or join the “Bleeding Group” by evading taxes. This explains in part why as the taxpaying population goes up (4million to 4.5million) the number of People complying and paying drops (2million to 1.5million).

He therefore proposed that, the Tax Policy should rather focus on enhancing and increasing voluntary tax compliance and this can be achieved by
1. Increased taxpayer education
2. Providing assistance to taxpayers who know the law but don’t know how to comply like filing of returns, computation of their taxes.
3. Strict adherence to the use of Taxpayer Identification Numbers (TIN). Every person is supposed to have a TIN which should be quoted on all documents and transactions to enable to GRA track all income earners and thus call on them for government’s share of taxes. In this way everyone will be covered because you cannot do any business transaction nor earn income without a TIN. This has been in our laws for over 5 years that I alluded to yet what is the level of enforcement?
4. To enhance compliance we should re-examine our penalty regime policy-wise. How?
Non-compliant Taxpayers should be segregated into:
(a) those who do not know the law and thus don’t know what to do;
(b) those who know the law but don’t know what to do; and
(c) those who know the law, know what to do but won’t just do it.
Once this segmentation is done the response tools are
1. For those in (a) they need education and guidance and not punishment
2. Those in (b) already know the law so do not need education but guidance
3. Those in (c) are the real recalcitrant Tax defaulters because they know the law and know what to do but will just not do it. They are to suffer the severest of punishments under the Tax law not only to bring them to order but also to serve as a deterrent to categories (a) and (b) who were cautioned and not punished so they know what fate awaits them if they gravitate into category (c) after they have been educated, guided and cautioned.

“As a businessman I hope you will agree with me the the forced closures and intimidating posture of revenue collection even makes dodging taxes appealing, right? That is why I believe in this segregation so together the Revenue officers and businessmen and women see themselves as partners in revenue generation to develop the country, of course for the benefit of all.

“The other key issue that affects voluntary tax compliance is the wasteful expenditure through bribery, corruption and all the bleeding avenues. When taxpayers do not see what the tax revenue is being used for then it becomes deterrent to their collective resolve to pay taxes. This is why I love this platform because it calls for sanity in government spending.
I have always advocated for Publish What We Pay. Every quarter the newspapers should carry a publication of how much government has collected in taxes and how have these monies been expended and to which sectors so we can all see.
This is what we see in churches and mosques - a Board or Notice showing collections for a week or month and how these have been spent. This leaves worshipers to feel the need to donate more”, he expressed.