Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH
65760 Eschborn, Germany
http://www.gtz.de Division Governance and Democracy
State reform and political participation, law and justice,
public finance and administration, gender.
Table of Contents
Introduction: Revenue Collection and Good Governance 1
1. The Economic and Political Background 2
The Economy 2
Political Structure and Current Reforms 2
Ghana Poverty Reduction Strategy (GPRS) 3
Monetary Policy and Inflation 3
2. The System of Public Finance in Ghana 5
The Distribution of Fiscal Powers 5
Central Government Finances 5
Local Finances 6
The Tax System 7
Central Government Revenue Mobilisation 7
The Institutional Framework: Major Revenue Agencies 8
Indirect Taxes: The Implementation of VAT 9
Direct Taxes 10
Income Tax Legislation 10
Profit Tax Legislation 10
Taxing the Informal Sector 11
3. Conditions for Successful Tax Reforms 12
Information technology 12
Status Quo: Collection and Registration 12
The Relation with the Taxpayer: The Objective of Voluntary Compliance 13
Status Quo: Dispute Settlement 13
Co-operation among Revenue Agencies and Related Institutions 13
Status Quo: Corruption and Informal Payments 13
Assesment and certification of financial statements 14
3.4 Human Resources 15
Status Quo 15
Outlook: Reengineering and Change Management 16
4. Remarks for the Future 16
Table 1: Annual Inflation rates (According to CPI) 4
Table 2: Budget indicators 1990 and 1999 5
Table 3: Central Government revenue mobilisation 6
Table 4: 1998 Local Government budget structure 6
Table 5: Central Government Revenue 2001 (bn Cedi) 8
Table 6: Income Tax Rates 10
Introduction: Revenue Collection and Good Governance
With regard to improving governance, the tax system plays a threefold role. Firstly, a sound macroeconomic policy is a crucial precondition for stability, equity and long-term growth. An adequate fiscal policy and its administrative implementation – effective revenue collection and accountable financial management – are core elements for any strategy aiming at improving economic governance. Secondly, increasing revenue collection– through taxes, fees or user charges – reduces the dependence of the state on foreign transfers. The government is able to finance and provide public goods – be it justice, security, or social services –Independent of the conditionality of external donors. The underlying assumption is that there exists a close link between mobilising internal revenue and good governance. Thirdly, the tax system bears an inherent conflict between "the state" and "the citizen", which is due to different levels of rationality. While in theory a capable state should serve in principle all citizens and, therefore, each "citoyen" should be willing to contribute financially to strengthening the state’s capacity, in reality citizens usually follow a free rider’s attitude and avoid taxation as much as possible. Therefore, a responsible, democratic, and inclusive state must ensure that tax collection is based on transparent and contestable rules in a fair manner. The way in which revenue is collected by the state mirrors its respect for citizen’s rights. Transparency and accountability in the tax system are all the more crucial as the tax administration deals with money and therefore there is receptive to unofficial payments or even corruption.
Even though reforming the tax system can be a valuable instrument for fostering growth and competitiveness, a piece-meal reform could in itself become a source of uncertainty and may jeopardize stability. The use of a profound empirical analysis of the status quo helps to minimize this risk. In order to take a first step towards a comprehensive analysis, this paper depicts the actual information gathered from visits and interviews made by members of the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) during a project evaluation in Ghana in 2002.
1. The Economic and Political Background
1.1 The Economy
Ghana shows considerable natural resources, including arable land1, forests and mineral deposits, mainly gold2, diamonds, and bauxite. Although rich in this respect, Ghana’s economic situation has deteriorated in the last decades. The main reasons were unsustainable borrowing, poor macroeconomic management, low level of foreign investment and political instability. For 2002, the GDP was estimated to reach a total amount of 47.000 billion (bn.) Cedi, which equals roughly 6 bn US$ (6 bn. EUR, calculated on at the rate of 1 US-$=8.000 Cedi). GDP per capita amounts to US$ 300. Total GDP is estimated to grow by 4 to 4,5%, and GDP per capita by 1.7 to 2.0 percentage points in 2002.
With reference to external trade, the projected trade balance displays a significant deficit of almost 820 million US$ for 2002, similar to recent years.
Political Structure and Current Reforms
Despite frequent changes of government, including four military coups, which reflect the political instability, the country’s history is remarkably peaceful, especially compared to its West African neighbours. The president, Mr. John Agyekum Kufour (New Patriote Party - NPP) took office after the presidential and parliamentary elections in August 2000. The transfer of power from the former president, Jerry John Rawlings (National Democratic Congress - NDC), went remarkably smooth; given the fact that Mr. Rawlings had been ruling the country for more than 10 years.
However, much of what is termed “political reform” lies in the realm of proposals (and sometimes wishful thinking). One way of explaining the lag of institutional reforms and economic development is the private appropriation of the state power by the neo-paternalist system. Power is exercised not by means of constitutionally mandated institutions but by informal institutions and networks. Under these circumstances, unproductive behaviour is rewarded and scarce public resources are systematically wasted.
Ghana Poverty Reduction Strategy (GPRS)
Due to an annual population growth rate of about 2,7 %, one of the country’s biggest challenges is to improve education, health and economic conditions for the youngest. The Ghana Living Standards Measurement Survey 2000 revealed an enormously high illiteracy rate of about 50,2 % and a rising danger of aids.
The envisaged policies to incentivate growth and to reduce poverty reduction have been defined in the Ghana Poverty Reduction Strategy (GPRS). The GPRS defines as principle goal:"to create wealth by transforming the nature of the economy to achieve growth, accelerated poverty reduction and the protection of the vulnerable and excluded within a decentralized, democratic environment.". To achieve this goal, the GPRS prescribes as central measures:
- to ensure sound economic management for accelerated growth; and
- to ensure good governance and increased capacity of the public sector.
One of the actions to be taken in order to accomplish good governance is to "ensure transparency and accountability in resource generation, allocation and management." (GPRS 2002, p. iii). Regarding macroeconomic issues, the GPRS addresses improvements in Fiscal Policy Formulation and Resource Mobilisation as two main areas for intervention (GPRS 2002, p. 47).
The GPRS pursues two objectives with tax reform: first, to enhance the rule of law by increasing accountability and transparency in revenue collection and second, to reduce revenue leakages and to increase the capacity for revenue mobilisation. The pressure for reform is considerable now; ongoing developments such as democratisation, modernisation or the land reform are forcing government to increase revenues
Monetary Policy and Inflation.
During the last 5 years, the Ghanaian currency 'Cedi' underwent a serious devaluation. According to the consumer price index (CPI), annual inflation rates have been crippling up to figures between 12 and 40%. Even thought inflation has been fallen steadily3 since March 2002, the Cedi continues to be affected by medium/high inflation rates. Based on consumer price indices, the inflation rate developed in the last years as follows:
Table 1: Annual Inflation rates (According to CPI)
End of period (%)
Source: MoF Budget Speech 2002, appendix 1
With respect to taxation, this situation affects revenue mobilisation in many ways. If the tax schedule is adjusted for inflation rates only with a time lag, then nominal income is taxed according to a higher rate under progressive tax regimes ('inflation tax'); similarly, stocks tend to be overvalued because the owner cannot replace them at the original price and use the stock for production which then inflates business profits. Both effects increase the tax burden on economic activity and provide for a strong incentive for tax evasion. On the other hand, after assessment, inflation provides an incentive for the taxpayer to delay the payment as long as possible.
Against this background, it is hardly surprising that private households, local companies4 and foreign investors distrust Ghanaian currency and the banking system in particular.
2. The System of Public Finance in Ghana
The Distribution of Fiscal Powers
According to the constitution, the state is structured in three layers of government: The central government, the regional level consisting of 9 regions and Accra (the national capital), and the so-called local governments including municipalities, districts and villages.
Central Government Finances
Although the hierarchy between the three is not always too clear, the central level (Government of Ghana, GoG) is very strong and powerful.
The analysis of the central government budget reveals a lack of fiscal discipline. The 2002 budget included a sizeable deficit of up to 10 per cent of GDP. Internal current revenue does hardly exceed 70 per cent of total expenditure; the outstanding 30 per cent are financed through internal and external borrowing. This practice is not new: the 2001 budget had a very similar structure, and the 2000 budget accepted even a greater gap between revenue and expenditure.
Table 2: Budget Indicators 1990 and 1999
(percentage of total expenditure)
(percentage of total expenditure)
Source: Minister of Finance, Budget Speech 2002.
The table reveals a high and increasing reliance on borrowing. Between 1990 and 1999, reliance on debt financing has increased considerably, as indicated by the decrease in tax revenue as percentage of total expenditure. As a negative consequence of the high level of borrowing, the debt service ratio has doubled. This reveals the necessity for improving economic governance, in order to enhance sustainability of state financing.
The brief analysis shows that central government revenue mobilisation plays a crucial role for financing local public goods and, therefore, strengthening the central government tax system contributes to strengthening the fiscal capacity of local governments.
Table 3: Central Government Revenue Mobilisation
Budget 2002 of the Central Government
% of budget
Non tax revenue
(loans, deficit etc)
Source: Minister of Finance, Budget Speech 2002
As foreign loans and public domestic borrowing increasingly make up for the revenue shortfalls, thus trapping Ghana in a vicious debt circle, the need for tax reform is obvious.
The role of the regional level is not sufficiently defined. The regions appear to lack sufficient responsibilities and resources vis-à-vis the central government. By contrast, role and relevance of the local governments seem to increase, especially in the countryside.
While the revenue creation of the regions – besides Accra – is rather poor, public finance in Ghana consists of the budget of the central government and the budgets of the local governments: Both levels are authorised to generate their own revenue. In 1998, local governments mobilised about Cedi 48 bn from their own local sources - local taxes, fees, licences, tolls, permits etc.
Moreover, the central budget also contains the District Assemblies Common Fund (DACF); this fund distributes the transfers among the different local governments. In 1998, the DACF amounted to 174 bn Cedi or 78.4 per cent of the aggregated budget of local governments, while local governments´ own revenue equalled less than 1 per cent of GDP. In 2002, the total amount of DACF transfer was Cedi 368 bn. In 1998 have been transferred by the DACF (district assemblies common fund) from the central level to the local level 174 billion cedis.
In 1998 the aggregated budgets of the Ghanaian local governments were structured as shown in table 4:
The budgets of all local governments run up to a total amount of about 1% of GDP; less than the fourth part is derived from local sources.
Given this financial weakness, local governments seem to be ill equipped for playing a serious role in national politics. This is probably one reason, why neither the Central government, nor the banking sector, nor investors or citizens regard local authorities as complete, stable and reliable partners.
The Central Government Tax System
Central Government Revenue Mobilisation
Compared to other African countries, Ghana’s performance in revenue mobilisation looks impressive. According to IMF estimations, tax revenue collection equals 16.3 per cent of GDP; in Western Africa, there is only Côte d´ Ivoire which provides for a higher rate of revenue collection (18.7 per cent of GDP), while comparable figures for most other African countries are well below 15 per cent. Table 2 allows for an analysis of central government revenue according to relevant sources.
Table 5: Central Government Revenue 2001 (bn Cedi)
Taxes on Income
Other direct taxes
VAT on domestic consumption
VAT on imported goods
Petroleum tax (excise tax)
Trade taxes, excises and others
Cocoa export duty
Other taxes (esp. import duties, excises)
Other revenue measures
Source: Minister of Finance, Budget speech 2002
The table shows that the GoG (Government of Ghana) had remarkable success in developing a broad revenue base. Indirect taxes contribute the bulk of revenue (equalling 7.5 per cent of GDP) to government’s coffers, while direct taxes (5.9) and trade taxes (4.2) come close behind. However, a closer look reveals that the bulk of VAT is levied on imports; therefore, domestic indirect tax collection is not too high. This leaves direct taxes the most important internal revenue base.
Revenue collection is highly concentrated, both in terms of regional distribution as well as in terms of taxpayer. Tax collection in the Greater Accra Region equals almost to 80% of total tax revenue and the 500 largest taxpayers contribute 60% of total tax revenue.
The Institutional Framework: Major Revenue Agencies
The bulk of Ghana’s central government revenue is administered by three revenue agencies. These are the Internal Revenue Service (IRS), VAT Service (VATS), and Customs, Excises and Preventive Services (CEPS). A new revenue agency, the Revenue Agencies Governing Board (RAGB), was being established as the GTZ mission took place. Its function and role, however, were not very clear yet. IRS is responsible for administering the Income Tax Act (comprising Individual Income Tax and Profits Tax) as well as some minor taxes. VATS is commissioned with collecting inland VAT, while the task of CEPS consists in collecting excises and trade taxes, including customs duties and VAT on imports.
IRS and CEPS were established in 1986. At the same time, the National Revenue Secretariat (NRS) was installed, but it was granted merely a weak co-ordinating role. After the implementation of VAT – the first attempt to introduce VAT in 1995 had been poorly managed and the government was forced to repeal it – VATS was created in 1998.
The three revenue agencies are completely independent from each other, Because the NRS had not been fully successful in co-ordinating the revenue agencies, the government altered it in 1998 into the Revenue Agencies Governing Board (RAGB) in order to ensure stronger co-operation. However, it was only in 2002 that the Board began to work effectively. Organisational structures and procedures of the revenue agencies under the RAGB show a broad range of variation. They have different local structures and use different procedures. While IRS covers the whole country with its local offices, VATS has only a very small number of inland offices, and CEPS covers the borders and their hinterland. Regarding processes, VATS has always been fully computerised from its very foundation and CEPS started using computers some years ago, while the IRS performs virtually all processes manually. These differential standards seriously hamper accountability and transparency in the tax system, as well as the effectiveness and efficiency of tax collection. Especially when it comes to audits and investigations, there is a dire for access to all sources of information.
Indirect Taxes: The Implementation of VAT
VAT was originally established in 1995 to replace the old sales and service tax system. As the rate was set at 17 per cent, the VAT was fiercely resisted and eventually suspended: the rate was seen as too high, the threshold (annual turnover of 25 million Cedi) was too low, the public information, campaigning and taxpayer education was too poor.
After three years of reconsideration, VAT was successfully reintroduced in 1998 under VAT Act 546. This time the added value of all goods (except agriculture and basic goods) and services were taxed with a rate of 10% and a threshold of 200 million Cedi annual turnover (suppliers of goods). In 2000, a major review of the VAT system was completed, which resulted in a tax rise to 12.5% and a broadening of the taxe base by lowering the threshold for suppliers of goods to an annual turnover of 100 million Cedi.
Income Tax Legislation
Principle legislation regarding direct taxation is the Income Tax Act 592 (2000) which comprises both Personal Income Tax (PIT) and Corporate Income Tax/ Profit Tax (CIT). Recently, the Act was amended by Amendment 622 (2002). The Act sets out tax policy as well as tax procedures.
Personal Income Tax for individuals is characterised by a moderately progressive rate structure, a very low threshold (Cedi 1,2m equalling 1,500 US$) and six tax bands with tax rates set between 5 and 30 per cent. Special features apply to non-resident individuals (20% of taxable income) and income derived from interest (final withholding of 10%).
Tabel 6: Income Tax Rates
Annual income (mil. of Cedi)
Tax rate (mil. of Cedi)
5% of income exceeding 1.2 mil. Cedi
0,06 mil. Cedi plus 10% of income exceeding 2.4 mil. Cedi
0.36 mil. Cedi plus 15% of income exceeding 5.4 mil. Cedi
3.15 mil. Cedi plus 20% of income exceeding 24 mil.Cedi
>48 Cedi and more
7.95 mil Cedi plus 30% of income exceeding 48 mil. Cedi
Tax payments of employees are withheld monthly according to a tax relief card (final end of year declaration). The employer withholds 5 per cent of salary as the employee's contribution to the social security fund and adds another 12.5 per cent as employer's contribution.
Profit Tax Legislation
Profit Tax legislation is also part of the Income Tax Act. Profits are calculated on an accrual base. According to the Act, tax rates on profits are differentiated according into six sectors or branches, and variate between the region in which the business operates. Companies listed at the stock exchange are subject to a rate of 30 per cent. The highest rate for "other businesses" reaches out to 32.5 per cent.
There is a rationale behind this complex rate structure. The government tried to create a system that would support redistribution (especially regarding the income tax on individuals) and would promote economic activities (non-traditional exports, investment in rural areas etc). However, due to the various bands and categories, the system is rather difficult to administer, provides legal niches that leave room for interpretation to tax officials, and therefore gives them discretionary powers in assessing the tax due.
Taxing the Informal Sector
For each tax administration in the world, taxing informal businesses is a hard job. Cumbersome registration procedures and sluggish official institution discourage even conscientious entrepreneurs from registering and formalising their business. Other entrepreneurs may take advantage of the lacking administrative capacity and remain purposely unregistered and unknown to the revenue agencies.
In Ghana, official institutions have for a long time been trying to reduce the gap between the formal and the informal sector. One of the strategies included simplification of the registration process, but only few informal businesses could be convinced to enter the formal sector. Nonetheless, the majority of entrepreneurs is well organised in business associations.
The IRS collaborated with these associations in order to bring their members under the tax law. Characteristics of this strategy are:
The IRS, together with the association, define relevant parameters of taxation; for example: informal tailors are taxed according to the number of sewing machines in use, multiplied with lump sum rates;
The tax period is very short; for example taxi drivers have to pay daily, other businesses usually weekly;
The association itself is authorised and responsible for assessing and collecting the taxes due, often simultaneous with association fees;
The association has the right to withhold a small amount of collected tax collections as compensation for collection costs;
The IRS reserves the right to supervise the behaviour of the sector and the association.
Two main problems remain. Firstly, as taxes are assessed according to lump sums, inflation has eroded the tax base. This is even bigger a problem as IRS depends upon goodwill of associations and therefore it cannot raise taxes freely. Secondly, IRS has to maintain and even to develop the performance of the engaged withholding associations.
3. Conditions for Successful Tax Reform
As witnessed by the foundation of the GPRS, the government currently seeks to enhance accountability and transparency in the tax system. A crucial condition for accountability is that the rules that apply to taxation are contestable and reasonable.
Status Quo: Collection and Registration
First, the processes and procedures of VATS and CEPS already follow modern standards to a considerable extent. Along with the introduction of the VAT, a computerised system was implemented from the very beginning. This puts IRS in the third position in terms of modern procedures.
Taxes are collected directly by the IRS, be it in cash or cheque; bank transfers are not allowed. This renders tax collection probably one of worst administered government functions. Because of the simple payment method, it cannot be verified whether assessment and collection correspond. Moreover, the reliance on cash transfers opens the door for side transactions and unofficial payments.
Taxpayers are registered at the IRS with a special IRS identification number. The tax administration is not very active in looking out for new taxpayers; taxpayers are registered as a result of their first officially recorded business transaction, which mean that taxpayers initiate registration themselves. As of August 2001, IRS had registered 50,000 to 55,000 taxpayers, of which 10,000 to 15,000 were companies (including 500 large taxpayers) and 40,000 were self-employed or individual taxpayers. It could not be verified how many of those are active taxpayers. One of the main reasons for this information deficit lies in the incentive structure of the organisation: IRS efforts to broaden the tax base depend heavily on its annual revenue target.
It is suggested here that in order to create an impartial and impersonal tax system, tax procedures ought to be taken out of the hands of officials and be handled automatically.
Therefore, the single most important contribution to promote accountability in the tax administration and to reduce the risk of rules being bent by tax officials is to establish an efficient information technology system that provides a reliable, complete, and accessible data base for authorised officers. Priority should be given to the creation of a central register that administers the TIN (Tax Identification Number).
The Relation with the Taxpayer: The Objective of Voluntary Compliance
Comprehensive knowledge of their rights and obligations is obligatory for the taxpayer and for the administration. Only against this background can adequate measures be taken in order to improve tax compliance.
Status Quo: Dispute Settlement
In cases where taxpayers do not agree with the tax assessment of a revenue agency, they may appeal to the Commissioner. This is one component of a future three-tier dispute settlement procedure, which is planned to be established in the future. For the time being, however, there is no functioning institutional structure yet for bringing tax cases to court. Ghana posses neither special tax courts nor judges specialised and trained in hearing tax cases.
Improved taxpayer service and assistance reduces barriers and helps the taxpayer to co-operate with the administration. This is an essential condition for improving voluntary contributes. Especially with regard to the co-operation with the taxpayer, changes imply introducing a complete different role model of tax administration – a service oriented identity while at the same time maintaining a firm with regard to revenue collection. This requires careful change management.
Fair and transparent co-operation with taxpayers is to be based on a proper legal definition of their rights and duties. Checks and balances must be integrated in the system. Therefore, an improved system of reviewing the decisions of the tax administration helps to strengthen taxpayers' rights and improves the accountability of the tax system.
3.3 Co-operation among Revenue Agencies and Related Institutions
Status Quo: Corruption and Informal Payments
Both the private and the public sector in Ghana are greatly harmed by informal payments and corruption. Under commission of the World Bank, the Center for Democracy and Development conducted the following study about the three central revenue agencies IRS, VATS and CEPS (Ghana Governance and Corruption Survey, August 2000).
Even though it is impossible to comprehensively understand informal payments traditions in the expenditure and revenue agencies as an outsider, the study is very insightful. Most of these informal payments do not seem to aim at influencing the outcome but on speeding up the sometimes cumbersome administrative process. Within the private sector, this practice is widely accepted.
Improving cooperation among Revenue Agencies and related institutions is a crucial element in setting up a System of Checks and Balances that is necessary to combat undesirable economic and financial activities. The Government of Ghana implemented various measures in order to prevent and punish corruption:
Internal and external institutions, including once-a-year control visits within the IRS and similar checks by the Auditor General, carry out regular revisions of the IRS tax officers´ performance. In addition, the Ministry of Finance (MoF) created a new auditing unit, the National Tax Audit Bureau, in order to ensure a permanent follow-up of the revenues agencies. Furthermore, the Complaints Office follows up on citizen reports of abuse of power by tax officials.
Assessment and certification of financial statements
The tax on profits is assessed according to certified financial statements. In Ghana, a supporting system of tax consultants and chartered accountants has existed for decades (e.g. Institute of Chartered Accountants -ICA- was established 1963). With regard to individual taxpayers, the administration currently applies a system of desk assessment. As part of its medium term strategy IRS appears to promote more self-assessment. Nonetheless, the audit system which is currently applied needs to improve – for example by improving audit coverage and quality between types of audit – in order to facilitate a greater reliance on self assessment.
An intensified co-operation between the revenue agencies will contribute to strength the tax system by streamlining the function of the respective agencies. A uniform data base with one single account for each taxpayer needs to be established, a common training system, an auditing system covering all sources of revenue, the expertise for example regarding cross-border taxation needs to be concentrated etc. A strong RAGB to co-ordinate, harmonise and standardise tax collection will contribute to improve the accountability, efficiency, and reliability of the tax system as a whole.
The Ministry of Finance is committed to strengthening the functions of RAGB. A first step was to create a so-called Large Taxpayer Office. Other functions to be transferred still need to be specified and reform strategy are not yet clear. Strengthening the capacity of non-governmental institutions (universities, research institutions) in tax policy formulation contributes to intensifying the tax policy debate among civil society. At the same time, internal capacity of the existing system (IRS, MoF, RAGB) needs to be strengthened in order to enhance the quality of the tax policy dialogue. This will increase the transparency of tax policy.
3.4 Human Resources
A core element of improving the motivation of staff consists in providing staff members with a long-term oriented incentive system. A main objective of the improved personnel management is to provide for rewards to tax officials for good performance and experience, and thereby to reduce the need for unofficial payments. In addition, long-term career perspectives encourage officials to stay with the revenue agency and improve the effectiveness of investment in human resources.
Currently, each of the revenue agencies has its own training system.
The training of IRS combines both, a short period of lecture-based training and on-the-job training. While IRS has already been working on the training system – with the assistance of the Centre for International Migration and Development (CIM) – additional measures should include regular re-training of tax officials in order to:
update the qualification when it comes to legal changes
broaden the curricula so as to include taxes which are not administered by IRS, in order to
create a corporate identity amongst all tax officials, regardless of which revenue agency they work for.
The training system is one of the core instruments for introducing tax officials to ongoing tax procedures. Without adequate training, it will hardly be possible to implement the reforms. Additionally, the IRS personnel administration system needs to monitor and evaluate the performance of its staff.
Once modern processes and procedures are established and automised, the character of an organisation changes. Especially computerisation requires consequential organisational reforms. Creating the momentum for reforms requires the motivation and participation initiating such of all staff members. The necessary change management needs to be informed by a thorough analyse of existing processes and organisational design.
4. Remarks for the Future
VATS and CEPS received considerable assistance from external donors, especially DFID and the WorldBank. However, no technical assistance has so far been committed to the IRS. In terms of the potential revenue base, IRS is probably the most promising of the three revenue agencies, able to collect roughly a third of government revenue. Moreover, international experience shows that collecting income tax is the most complex issue in tax collection and therefore reserves particular attention.
Beyond strengthening the IRS, the co-operation with RAGB aims at strengthening the tax system as a whole. At the moment the process of deciding which functions should be transferred to the RAGB, when and how, is still going on. Current discussion concentrates on the following functions:
- Creating a central register that administers the TIN;
- Establishing comprehensive training system;
- Introducing a National Audit Team; and
- Establishing a Large Tax Payer Office (LTO)
All three functions overlap with the work currently performed by the IRS and the RAGB. That is why streamlining them will help to effectives the efforts of both, IRS and RAGB.
1 Agriculture continues to be the backbone of Ghana's economy, accounting for more than one third of GDP or 60% of employment. The informal sector contains more than 80% of all economic activity and accounts for about 30% of GDP.
2 gold and cocoa constitute more than 50% of exports (total merchandise exports: 2.037 million US-$, total merchandise imports: 2.858 million US-$).
3 mainly because of the relative stability of the Cedi and the government's tight fiscal and monetary policies (EIU country report Ghana june 2002) :The exchange rate -related to 1 US-$- has moved from (average): 5.465 Cedi in 2000 (average) to 7.170 Cedi in 2001 (av) and moves actually (july 2002) about 8.000 Cedi.
4 The economy and the citizens remember well that bank accounts have been (partially or totally) frozen in order to provide short-term solutions to urgent problems.