A Senior Lecturer at the University of Ghana and the Director of Ali-Nakyea and Associates, Dr. Abdallah Ali-Nakyea has advised the Ghana Revenue Authority (GRA) to focus attention on non-tax revenue, block illicit financial flows, and all else related in order to shore up revenue.
The tax expert indicated that the GRA’s efforts, while commendable, should not focus entirely on improving revenue generation via taxes without paralleled attention to non-tax revenue sources, illicit financial flows and transfer pricing issues.
Specifically, non-tax revenue sources, although contribute less to the country’s total revenue as compared to taxes, include certain components from which significant revenue can be tapped.
“… Domestic resource mobilization should be looked at holistically, not only taxes… Government has shares in certain sectors. Are we ensuring that government’s shares reap considerable amount in dividends to the government?
“We are looking at other components like penalties, interest, etc. They may be small but some of them are that significant.”
Dr Ali-Nakyea, Director of Ali-Nakyea & Associates
Furthermore, the petroleum audit through the use of digital monitoring saved the government, GHS1 billion in revenue, for the first quarter of 2021. “If we average GHS1 billion every quarter, that is about GHS4 billion for the year. That is just downstream sector. Have we looked at that of mining, the upstream sector and other sectors?”
“The fuel marking will ensure a robust system devoid of leakages, and the appropriate taxes paid. Once we look at all the non-tax revenues, then of course the leakages add to the domestic revenue mobilization.”
Speaking in an interview with the Vaultz News, he noted that if these other sources of revenue mobilization improve, they may ease the pressure on tax contribution to domestic revenue mobilization.
Leakages in revenue mobilization
Accordingly, Ghana loses billions of cedis through illicit financial flows and transfer pricing every year. According to a report by the Africa Centre for Energy Policy (ACEP), Ghana on average loses $1.4 billion every year in the extractive sector to illicit financial flows.
More to the point, transfer pricing is also a huge drain on revenue, he noted. While commending GRA’s transfer pricing unit of handling such cases satisfactorily, he indicated that much needs doing in this regard.
Based on the requirements of the new transfer pricing regulation 2020 (LI2412) companies in controlled relations are to file transfer pricing returns not later than four months after the financial year-end.
According to Dr Ali-Nakyea, a company engaged in transfer pricing may reduce its bottom line. By so doing, the GRA receives as much in revenue what the company declares as returns. That notwithstanding, such losses may be reduced as the GRA links the company’s filed returns with that of other countries with whom it can exchange information.
Furthermore, the GRA would have information about companies from those jurisdictions operating in Ghana. This is in terms of what they are reporting in those other countries.
For instance, UBA Ghana recently announced contributing 11 percent of the UBA Group’s Operating Income. Also, 12 percent of its profit before tax, and 9 percent of the Group’s profit after tax.
In relative terms, the GRA can therefore tell if UBA Ghana reported averagely, 10 and 11% in profits and taxes. This should be in comparison to their global contribution, he asserted.
He further indicated that where these don’t match, then perhaps there may have been some intercompany transfers or charges which must be traced and retrieved. This is how multinational companies should be handled in terms of transfer pricing, he added.
