TAXATION IN GHANA: A FISCAL POLICY TOOL FOR DEVELOPMENT

INTRODUCTION The purpose of writing this book is to share my accumulated knowledge and experience from studying taxation as a discipline at the academic and professional levels of education; as well as, a decade exposure while working with the Ghana Internal Revenue Service (now Ghana Revenue Authority). Another extensive teaching of taxation and fiscal policies across the tertiary educational divide covering-graduate, undergraduate, and professional levels. There has been a lot of developments in the tax regime and fiscal policies domain; presenting both challenges and opportunities to the tax practitioner, the tax administrator, policy maker, scholars, and the general public. The Ghanaian is not new to taxation because it has existed in one way, shape, or form in the historical past, when traditional rulers-imposed royalties on the utilization of resources such as arable land, water bodies, and minerals. As a result, taxation is old in Ghana and dates to the history of human society. However, taxation has never been accepted because it involves the payment of money without the promise of direct benefits to the payer. Consequently, payment of taxes does not correspond with either a direct or indirect benefit. Most countries have used taxation as the main revenue generating approach; others, especially, several developing countries have favored more of debt financing because the political cost linked to the imposition of taxes. In a few countries, the emphasis has been placed on the production approach. This is the case for some Oil producing countries which make sufficient revenue from oil sales. There are arguments for and against the use of the approaches namely taxation, debt financing, and production. All the approaches will be explored in the book. There has been advancement in Ghanaian society in the past century since the imposition of the failed poll tax regime in 1898. The progress that has been experienced in society has come with a price tag because civilization is costly; yet, the issue of how the cost of human sophistication should be met has been a debatable and topical issue to date. Nevertheless, there is convergence on the price attached to development because a lot of people generally agree that the development of society has a cost component, involving the maintenance of government machinery from the local to the national levels, improvement in human settlements such as housing and corresponding amenities; as well as, enriched social and economic structure. Amid the implication for financing the cost of human progress, different countries have experimented with varied approaches such as the use of debt, production, and taxation, or a combination of the approaches in the process. Successive governments of Ghana have resorted mostly to taxation and debt financing of the budget but in recent times, an attempt has been made to apply the production financing alternative. While a significant number of studies have been conducted on Ghana's debt financing; a few has been accomplished on taxation. There are not enough studies on the production approach. Perhaps, the approach is quite new to the Ghanaian environment. Taxation is linked to the fiscal policies of Government through the annual budgetary cycle, where budgeted expenditure is linked to a corresponding budgeted revenue streams to meet those commitments. The overarching role of taxation is the raising of revenue to meet spending. As a result, the anticipated revenue can be mobilized through production, debt financing, and taxation, among others. Ghana is a secular society with three dominant religions, encompassing: Islam, Christianity, African Traditional Religion (ATR). Interestingly, taxation is associated with these religious groups. While Christian definition of a tithe is one-tenth, the equivalent provision in Islam is one-sixteenth. Nevertheless, history has it that there has been stiff resistance upon the introduction of major taxes in Ghana such as those of 1931 and when Value-added taxation was initially introduced in Ghana. The aim of tax administration is to achieve voluntary compliance from tax reforms arising out of effective fiscal policies of government; combined with monetary policies of the Central bank to drive economic policies of the day. The negative responses to the taxation debate have centered on tax protests, tax evasion, tax avoidance, smuggling and corruption; as well as, issues of revenue loss, tax gaps, and the underground economy. As a result, political parties must come clean of how monies will be mobilized through taxation, such that the segment of society that will be taxed should be captured in the Manifestos of political parties and disclosed during electioneering campaigns. This will allow for electorates to make informed decisions because elections have consequences. By this, taxation will become one of the critical decision-making considerations of choosing a political party or a candidate. For that reason, fiscal policies can shape the political discourse to make all the difference. In these 70 Chapters of this textbook, taxation has been viewed as: (1) an integrated discipline, which has evolved overtime. Some of the issues considered in the discussion, include the following: (i) the multiplicity of taxes and tax laws, (ii) double taxation involving the payment of taxes on dividend and the corporate income taxes, (iii) taxation acting as a disincentive to hard work when extra efforts are unduly taxed; as well as (iv) the dichotomy between the rights and the responsibility of citizens arising out of the non-excludability variable. Where there is a right, there must be a commensurate responsibility. (2) A fiscal policy tool for development. Consequently, the author seeks: (a) to provide the reader with a solid conceptual framework regarding Ghana's tax system with a view to contributing to the body of knowledge. Such that the concepts could be applied to other countries of interest. (b) To advance policy recommendations to improve fiscal policy in particular. The dynamic nature of the subject-matter makes the literature on taxation outmoded in the shortest possible time because each annual budget has the potential of making drastic changes to the tax laws; and (c) to facilitate further exploration of best practices to make the tax system in Ghana more robust. The knowledge and experience in taxation shared in these contents have been grounded in tax research of 75 years, as of 2018. Let us dive into the pages of the book.