McKinsey to help Ghana Revenue Authority improve tax collection process

17 September 2018 Consultancy.africa

The Ghanaian tax authority has hired global management consultancy McKinsey & Company to assist with improvements in the collection process. The move comes after the authority found a gap of nearly $370 million between its expected revenue collection for this year and the real funds accumulated.

Ghana’s revenue system is currently navigating a tough period. A low run of collections has led to a situation where the international Monetary Fund (IMF) has had to step in and recommend an increase in taxes, given the fact that the country’s fixed investment levels are already comparatively low.

The government responded with strict measures in July, when the President Nana Akufo-Addo declared a proportional taxation system of sorts where those of higher income levels would pay higher tax. The drive was introduced with the specific objective of raising approximately $260 million by the end of the year.

McKinsey to help Ghana Revenue Authority improve tax collection process

However, the measures appeared to have missed their mark considerably, given that the revenue collected up until August this year have fallen short by nearly $370 billion of the target for the same period. If the trend continues, this will be the latest in a number of consecutive years when the country’s revenue levels will fall substantially short of the target.

The country is currently engaged in an IMF bailout programme worth a staggering $1 billion. The programme is due to expire next year, and there have been few promising indicators that the revenue collection systems are improving. Last year, the country missed its revenue collection target for the whole year by $450 million, which represents over 6% of the total expectation for the period.

According to the commissioner General of the GRA Emmanuel Kofi Nti, the shortfalls are a result of failures in the customs collection department of the country. In order to help rectify the situation, the GRA has now called upon the services of McKinsey & Company.

Nti explained that McKinsey will “change GRA’s systems to be comparable to the best in revenue administration in the world through simplifying our processes and introducing innovation.” Ghana is among the most politically stable countries across Africa, but its high public debt levels might prove a major source of instability if the situation is not improved upon.

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Technology is essential to simplifying the tax compliance process in Nigeria

03 April 2019 Consultancy.africa

Despite increasing pressure on public coffers and the expanding need for tax collection, inefficiency and a lack of user-friendly mechanisms are posing a major barrier to paying taxes in Nigeria, according to Head of Tax at global professional services firm PwC Nigeria Taiwo Oyedele. He posits technology as the solution to this problem.

As one of the largest economies in Africa, Nigeria is increasingly progressing towards higher degrees of economic prosperity, although the government is struggling to benefit from this growth in the current scenario. According to Oyedele, the country’s “revenue to GDP ratio” is at the lowest end of the global spectrum.

Oyedele attributes this high rate of default to the difficulty that Nigerian citizens face in paying their taxes, something that is simultaneously acting as a barrier to other government efforts to solve the problem. “It is a contradiction: you need tax money but you make the process very difficult,” he says.

Currently, the use of digital applications to pay taxes is among the payment options. Oyedele recommends that technology should be made the sole avenue through which tax is collected and administered, thereby making the process of calculation, payment, and filing for returns more efficient.

Technology is essential to simplifying the tax compliance process in Nigeria

In addition, using technology is expected to reduce the costs of paying taxes in the long run, due to what Oyedele terms as “cost of compliance.” “It is actually the money the taxpayer pays that doesn’t get to the government. So, both the taxpayer and the government have an objective to reduce that cost,” he said. 

Oyedele was speaking at the Tax Academy Clinic, and urged tax authorities in the country to enforce reforms in the system. These would be over and above the reforms introduced under the previous Minister of Finance, who initiated the Voluntary Assets and Income Declaration to reduce default rates.

Technology is the key according to Oyedele, and he pledged that PwC would support in the process of integration. “In the past, getting your tax clearance certificate used to be like rocket science.When you need it to buy a plot of land or get a contract, getting the TCC is difficult. With technology now, one should be able to get that immediately,” he said.

“We know that these platforms are not perfect yet; so, our role as PwC, helping so many people to pay their taxes and also paying taxes ourselves, is that once we identify what the problems are, we get the stakeholders to come together to see how we can fix the problems,” he added.