McKinsey helps Ghana Revenue Authority achieve double digit growth rates

24 January 2019

Following the appointment of global management consultancy McKinsey & Company to support with tightening its revenue collection process, the Ghana Revenue Authority has expressed its satisfaction with the firm’s work so far, particularly in light of stabilised revenues. 

Financial reports at the Ghana Revenue Authority (GRA) last year revealed a deficit of nearly $370 million between expected levels of revenue in the country and the actual revenue collected. The low levels of revenue sparked concern about stability in the country, prompting the International Monetary Fund to suggest a tax hike in the country.

The government subsequently introduced a proportional taxation framework, with the objective of covering the gap by nearly $300 million. The measures failed to cover the deficit, which is particularly detrimental to the country, given that it is engaged in an IMF bailout programme of $1 billion that expires this year.

McKinsey helps Ghana Revenue Authority achieve double digit growth rates

The GRA examined the possible internal shortcomings that might be contributing to the problem, attributing the issue to the customs collection department and the lack of transparency therein. To help rectify the issues, the GRA enlisted the services of management consultancy McKinsey & Company.

Now, the GRI has publicly declared its satisfaction with the work conducted by McKinsey so far, particularly as revenue levels returned to an upwardly trajectory towards the end of last year. Revenue levels grew by 5.3% in October last year, 16.3% in November and more than 18% by the end of the year.

Commenting on the performance, Commissioner-General of the GRA said, “The last quarter of the year we did well because they were offering good advice and helping us with the kind of work that we were doing; especially for the Customs area, the collections up to the end of the quarter weren’t that good.”

“We have the belief that ending 2019, things should be far better than we experienced in 2018,” he added. At the current rate of growth, the GRA expects revenue levels to reach Cedi 45 billion by the end of 2019, which is substantially higher than the Cedi 38 billion revised target for the end of last year.

Technology is essential to simplifying the tax compliance process in Nigeria

03 April 2019

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.