Push to exceed revenue target can be unproductive
The push to exceed revenue targets directive without fostering innovation can indeed lead to counterproductive outcomes in the realm of tax collection.
When tax authorities are overly focused on surpassing these targets, it can create a pressure-cooker environment that might incentivise tax collectors to engage in negotiations with taxpayers that are more about personal gain than about the fair and equitable assessment of taxes.
This not only undermines the integrity of the tax system but also risks eroding public trust in tax administration.
In the face of challenging economic conditions, the traditional approach of enforcing tax collection to meet or exceed revenue targets is increasingly proving to be counterproductive. There is a need for a paradigm shift towards promoting and encouraging voluntary tax compliance as a sustainable and equitable strategy for the new Finance Minister, Amin Adams. By fostering a cooperative relationship between the tax authorities and taxpayers, we can ensure a stable revenue flow, enhance public trust in governmental institutions, and contribute to a more resilient and inclusive economy.
Our country’s economic landscape is characterised by its dynamic yet volatile nature, with harsh economic conditions posing significant challenges to both citizens and the government. The role of taxation in this context is pivotal, serving as a primary source of revenue for the government to fund public services and developmental projects. However, the prevailing strategy of aggressive tax collection has not only strained the relationship between taxpayers and the government but has also been inefficient in the long run. The appointment of a new Finance
Minister presents an opportune moment to reevaluate and adopt a more sustainable approach.
Case for voluntary tax compliance Voluntary tax compliance is the willingness of citizens and businesses to fulfil their tax obligations accurately and timely without coercion. This approach is rooted in the principles of trust, mutual respect, and a shared understanding of the importance of taxes in societal development. Several factors contribute to its efficacy: Economic efficiency: Voluntary compliance reduces the need for costly enforcement actions and agrdministrative procedures, allowing for a more efficient allocation of resources.
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Equity and fairness: Encouraging voluntary compliance helps ensure that all taxpayers contribute their fair share according to their economic capabilities, promoting a sense of fairness and equity.
Sustainable revenue generation: A tax system that relies on voluntary compliance is more resilient to economic fluctuations, ensuring a stable revenue stream for the government.
Enhanced public trust: By treating taxpayers as partners rather than adversaries, the government can foster a positive relationship with the public, enhancing trust in state institutions and the legitimacy of the tax system.
Strategies for promoting voluntary tax compliance
The finance minister can adopt several strategies to encourage voluntary tax compliance, including Tax education and awareness: Implementing comprehensive education programs to enhance understanding of the tax system, the importance of taxes, and taxpayers’ rights and obligations.
Taxpayer services and support: Providing accessible and efficient taxpayer services to assist individuals and businesses in complying with tax laws, including online portals, helplines, and advisory services.
Simplifying the tax act:
Streamlining tax laws and procedures to make compliance less burdensome and more straightforward, thereby reducing the cost and complexity of fulfilling tax obligations.
Building trust through transparency and accountability: Demonstrating the effective use of tax revenues in public projects and services can motivate taxpayers to contribute their part willingly.
Under the harsh and unbalanced economic conditions, a shift towards promoting voluntary tax compliance offers a more sustainable, equitable, and efficient approach to achieving revenue targets. By fostering a culture of cooperation and trust between the tax authorities and the public, the Finance Minister can pave the way for a stronger, more inclusive economy.
This strategy not only aligns with the principles of good governance but also ensures that Ghana’s developmental goals are supported by a fair and resilient tax system.
Recommendations
The transition to a system that encourages voluntary tax compliance requires concerted efforts from all stakeholders. The government should prioritise tax reform that simplifies the tax laws, invest in taxpayer education, enhance transparency, and improve taxpayer services. Ultimately, fostering a culture of voluntary compliance is not merely a fiscal strategy but a commitment to building a more equitable and prosperous Ghana.
On the faceless tax assessment:
Promoting a faceless tax assessment system, which leverages technology to minimise direct interaction between taxpayers and tax officials, can enhance efficiency, transparency, and impartiality in tax administration.
However, it’s crucial to ensure that this system incorporates mechanisms for taxpayers to exercise their right to object or appeal against assessmentsthey perceive as incorrect or unfair.