Of Taxes and their Collectors…

By Dr. Michael J.K. Bokor, E-mail: mjbokor@ilstu.edu

I want to take up an issue that is both intriguing and speculative but useful for those interested in our country’s development. It is about Ghana’s tax regime and what I think should be done to improve the country’s revenue-generation capacities and to provide some concrete reliefs for tax-payers. I hope the 10-member Economic Advisory Team that President Mills has just constituted will have something concrete to do about the tax system in the country, among other purposes. The call has already come from the Association of Ghana Industries for the government to “bite the bullet” to ensure that its policies achieve desired results. One of such “bullets” is the purposeful action to be taken on our tax regime.

But first, let me bring in something from elsewhere that is more than an eye-opener. According to a recent news report from Reuters, the US President, Barack Obama (who filed the 2008 tax jointly with his wife, Michelle), reported an adjusted gross income of $2,656,902. They paid roughly $855,000 in federal income taxes and almost $78,000 in state income taxes. The majority of his 2008 income came from sales of his two memoirs; he is also a best-selling author. According to Fox News, the couple actually pulled in $4.2 million in 2007. The Vice President, Mr. Joe Biden, and his wife reported an income of $269,256 for 2008, a good portion of which came from sales of Mr. Biden’s memoir, Promises to Keep.

To the US citizen, the period for filing annual tax returns is a “cocoa season” because of the expected benefits. After all, the taxes paid in the previous year were invested in ventures by the government and it must pay back to the tax payers the benefits accruing from that civic responsibility. Now, let me turn to my main purpose by asking these questions: Isn’t it time for Ghana too to implement the annual filing of taxes by all those who engage in money-earning ventures? What will it take for such a measure to be institutionalized and implemented?

If we had such a system and could monitor events, we would know how much our public office holders earned and how much tax they paid. It would clear the air and instill confidence in the public. In that sense, no one would be in the dark regarding how much our President, for instance, earned and what his tax obligations were. Then, at the end of his term, we would judge things for ourselves, especially in matters concerning his End-Of-Service Benefits. I know it for a fact that workers pay income tax every month, which is deducted at source; but they are not told what their taxes are used for nor do they see evidence of its use in a manner that would instill confidence in them. Shouldn’t the mantra of “transparency in government” manifest at the level of taxation too?

At the end of the year, nothing is done to make the poor workers know how much they contributed through taxes or whether there is any threshold that will compel the state to turn back to them their earnings (with interest too!) as is done in the US, where the IRS prosecutes tax defaulters (Even those who fail to file their annual tax returns are taken to task).

All-in-all in Ghana, the tax-payers (especially those who pay income tax, which is deducted at source) appear to be shouldering the responsibility for filling the national coffers with part of their earnings without any hope of ever being rewarded. Don’t tell me about development projects and how they are funded. The tax payers must have the opportunity for reward as is done in the US. Deducting income tax from workers’ salaries and keeping the workers in the dark in terms of their tax benefits is not only inhuman but it also smacks of unproductive politics in our part of the world.

In effect, government must take prompt steps to institutionalize the annual filing of taxes. It is only then that we can be seen to be putting our house in order. There is need for vigorous work to create and monitor a reliable database on all who are eligible to pay tax. The Ministry of Information must take up this task of vigorous public education on such an important issue instead of waiting to respond to criticisms against government. I have already advocated for the abolition of that waste-pipe but President Mills chose to do otherwise!! Unfortunately, the Internal Revenue Service also appears to be deaf and blind to how its counterpart in the US does its business to raise revenue at the various levels of government (County, City, State, and Federal). The VAT Service is also in the fray. As for the other revenue-collecting agencies, they appear to be stuck to tradition and their personnel know how to intimidate people for personal gains when it comes to tax matters. How many times haven’t we been told of such misconduct?

In Ghana, the IRS is always in the news when it chases traders around, trying to twist their arms to meet their tax obligations. Those who know how to grease palms are left off the hook and the small fries dragged to court. It is appalling how the IRS functions and I challenge it to prove me wrong. These tax-oriented institutions must be overhauled and equipped to help the government streamline the tax regime in Ghana. The government itself must come up with appropriate measures to make tax administration friendlier than it has been all these years. Meeting tax obligations should be tackled as a civic responsibility and not anything to be done out of compulsion. This is the message that must accompany efforts to restructure the tax management system. President Mills is credited with uplifting standards at the IRS (formerly, the Central Bureau of Statistics) before entering partisan politics to become the Vice President from 1996 to 2001. Now, as the President, one expects him to revisit the institutional (in)capabilities of the IRS and other organizations involved in the country’s tax administration network so that policies could be enunciated to enhance their functions.

Unless the people see the government taking concrete steps to improve the situation, no amount of snuggling close to the image of the Obama-led US government will give it any credit. Ghanaians are watching the situation and noting down events that will influence their decision-making for the 2012 elections. The time has come for the appropriate measures to be taken to ensure that we are ready to use our resources to improve our living conditions. We have all these resources and must not continue to present ourselves as a sorry case of being perpetually underdeveloped. The mere hot air that our government functionaries have been blowing over the years on matters of policy won’t put food on the table of the citizens.

The silence over declaration of assets by public office holders must be broken to give us a clear picture of where our government appointees (politicians, generally) stand today and what they will be when they leave office. What is preventing government from publishing these declarations for all to see how much anyone is worth and how much tax each pays?

More importantly, the tax administration mechanisms should be transparent and effectively implemented to support President Mills’s agenda for “Change”. So far, nothing drastic appears to be on the horizon in terms of the approach toward improving the environment for effective governance that will move Ghana beyond where Kufuor and his HIPC mentality have taken the country. Anything short of this approach will invalidate the NDC’s electioneering slogans and make a mockery of its claim to have something better to offer than what Kufuor and his gang did.

One thing is clear, anyway. Both the NDC and NPP may be at each other’s throat for various reasons; but in matters concerning the US, it is clear that they have an identical resolve to benefit politically from their association with the leaders of the US. Kufuor did all he could to present himself and his government as the “pet” of George Bush while President Mills and his NDC government are beginning to tap into the Obama icon for political expediency. What will this political expediency mean to a hungry people?

In all these efforts, however, the two political camps appear not to be learning any useful lesson from what the United States has done to be what it is today and why it continues to do so to “make” it in politics and economic development. The US is an economic and military giant as a result of its natural endowments and other factors known to those who understand the workings of its military-industrial complex. Ghana is nowhere near the US in that sense. But by quickly drawing parallelisms between happenings in Ghana and those of the US, both Kufuor’s NPP and the NDC government have already set the tone for a kind of comparison. They have behaved as if any association with the US is an “Open Sesame” for Ghana’s development agenda. Pitiful.

The NDC has associated itself with the Obama-inspired politics of the US and appeared to have benefited from that move. Pairing Obama’s picture with that of President Mills, for instance, had its own implications for the demand for “Change” that dominated the immediate pre-election atmosphere in December and January. The similarity ends there.

Then, when Obama telephoned President Mills last week, it became a major safety net for the government as it sought to cushion itself with the seemingly positive fallouts, even though some NPP elements have pooh-poohed that interaction and begun doing negative propaganda about it. God knows what this desire to be close to the US portends.

But the point I want to make is that if President Mills’ government seeks to bask in that glory (more so now that the two brands of the “Democratic” parties are in power in either country), it must as well emulate the examples of the US’s approach to democratic governance in terms of freedom of information and the indiscriminate manner of tackling national assignments. Tax administration is one area that the US’s political system uses to get the citizens to be responsible; and one expects the Mills government to learn the useful lessons from the US to boost public confidence in matters concerning taxation. Why not?