In a familiar narrative of governmental attempts to increase revenue, the Ghana Revenue Authority (GRA) has unveiled yet another tax measure aimed at addressing the country’s fiscal needs.
The latest initiative, targeting the foreign income of resident Ghanaians, emerges as a replacement for the suspended Value Added Tax (VAT) on electricity.
This move brings to mind the controversial e-levy, which failed to meet its revenue targets amid widespread public opposition.
With memories still fresh of the e-levy debacle and its failure to generate projected income, doubts persist regarding whether the GRA’s new measure is indeed a sustainable solution or merely another ill-fated attempt at revenue generation.
“We [GRA] will specifically speak to the measure that is replacing the VAT on electricity. So, the measure that we put in place is a compliance measure on foreign income of resident Ghanaians.”
GRA Commissioner-General, Julie Essiam
The GRA Commissioner-General, Julie Essiam said, “This measure is already in the law, as the minister said, so it is not a new measure. The difference is that its implementation and application have not been implemented effectively.”
Essiam emphasized that the GRA, with support from the Organization for African, Caribbean, and Pacific States (OACD), has refined the processes and structures to ensure effective implementation.
“So for us to implement this measure, we have, with the aid and assistance of the OACD, gone through sustainable processes and structures to ensure that when we implement this measure, the sustainability of this measure is going to go beyond 2024 in our revenue numbers.”
“So this is the measure that, together with the Government of Ghana and our mother ministry, the Ministry of Finance, is going to take place or is going to replace the VAT on electricity.”
GRA Commissioner-General, Julie Essiam
The move comes as part of the government of Ghana’s efforts, in collaboration with the Ministry of Finance, to find a long-term solution to the country’s fiscal needs, especially in revenue mobilization.
Julie Essiam said she was confident that this measure would be sustainable and credibly replace the projected GH¢1.8 billion in revenue target, marking a significant shift in the nation’s tax policy landscape.
Potential Challenges
While the GRA claims that the measure targeting the foreign income of resident Ghanaians is not new and has been part of the law, the effectiveness of its implementation remains questionable.
A potential loophole in this measure is the enforcement and monitoring of compliance.
Enforcing compliance on foreign income can be challenging due to the complexities involved in tracking and verifying such income, especially when it involves offshore accounts or investments. Residents may attempt to evade taxes by underreporting their foreign income or by using various tax avoidance schemes.
Moreover, ensuring effective enforcement requires sufficient resources, including skilled personnel and technological infrastructure, to monitor and audit taxpayers’ foreign income accurately.
Without adequate resources and capabilities, the GRA may struggle to identify and address instances of non-compliance effectively.
Another potential loophole is the possibility of residents shifting their income to jurisdictions with more favorable tax regimes or where it’s easier to conceal income. This could undermine the effectiveness of the measure in generating sustainable revenue beyond 2024.
Additionally, the success of this measure relies heavily on international cooperation, particularly with organizations like the Organization for African, Caribbean, and Pacific States (OACD). Cooperation with other countries is essential for exchanging information on taxpayers’ foreign income and combating tax evasion effectively.
However, securing such cooperation can be challenging, as not all countries may be willing to share information or cooperate in enforcing tax compliance.
As such, while the GRA’s initiative to target the foreign income of resident Ghanaians may have the potential to generate sustainable revenue, its effectiveness will depend on the GRA’s ability to address these loopholes and ensure robust enforcement and international cooperation.
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