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30.10.2005 Feature Article

The Burden Of Over-Taxation By The Gov't Of Ghana

The Burden Of Over-Taxation By The Gov't Of Ghana
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The Ghanaweb of October 26, 2005 indicated the government of Ghana has found a computerized way of valuing vehicles. The report originating from the government paper Daily Graphic, said:

"A computerised system with an elaborate database for assessing the values of imported motor vehicles and levying appropriate import duties on them has been introduced at the Tema Port.

The system replaces a decades-old manual system which was open to frequent abuse and resulted in weekly losses of hundreds of thousands of dollars to the state through short collections" (Ghanaweb, October 26, 2005).

This obviously gives the impression that the only stinky problem that was at the Ghana CEPS/Customs or Ghana Ports and Harbors is the undervaluation of vehicles. If the losses are hundreds of thousands of dollars per week, assuming it is only $200,000 in losses and represents 10% losses, a simple Arithmetic shows the amount being collected is over $2 Million per week or over $100 Million per year. Isn't this an irony that with a minimum $2 Million per week, the government officials do not see it fit to provide clean toilet facilities for customers to use at our ports whiles waiting to pay these amounts!?

A decent public toilet with water well and pump to supply water daily will cost about $10,000, one half of one percent of the daily revenue intake! It is the opinion of some of us that our government officials have disgraced Ghana's image as decent civilized people, and every one of them in charge must be severely punished or fired from their jobs for such negligence that hurts our nation's image, respectability, and hence eventually economically! President Kufuor is the head of the government, this affects him too!

The report gives the impression that the problem at the ports, the source of many bitter customer complaints, is rather from under-valuation and not over-valuation. Simply, it does not make sense when people complain and government officials simply dance around the problem! When people are complaining of paying 100% and sometimes 200% of the value of their used vehicles, what service and value can a computer do for them? People ship salvage vehicles to Ghana that provide employment to some auto repair shops. They also pay VAT taxes. Why should they be assessed duties and taxes as if the cars are new? Ghanaian Officials must be told that Ghanaians overseas are not rich oil barons! They work hard and long hours to pay their house mortgages or rent, and other household expenses wherever they live, take care of their immediate families and their relatives or “Ghanaian family” at home, and save through pain to purchase personal good such as vehicles. Who in his right mind will then buy a car without negotiating prices if they can! In America only a fool or ignorant rich foreigners [if there is anything like that] may buy a vehicle without negotiating the price down, new or used vehicles? Why do our people at home act so naïve sometimes?

This writer is mature enough and has over the decades, through many Presidencies and rulers, written on such subjects as taxation and development. I feel obligated to point this out. The Kufuor government has done well to restore peace and freedom of speech that was missing under the Rawlings P/NDC era where even gross injustices could not be reported on. However, if the Kufuor government wants to leave a legacy and be put on record as a serious government which achieved any substantial progress, they should focus on how they can help our educated people overseas return home and settle in Ghana. This was the long term plan of first Premier Kwame Nkrumah who set up the system, so these returnees can either be employed in such critical areas are TOR, our hospitals and our universities, or help create jobs with the capital funds they bring from overseas. Why do our Ministers and officials instead seem to focus on how they can devise means to take the money from these returnees? Is that the best our government officials can do? Every government official, it seems, once they are in the system, think only of themselves. As Shakespeare once wrote, “they forget the base degrees by which they did ascend” (Julius Caesar).

LAWS are made by man to protect and serve man living in society. Tax Laws and assessment are made with a budget in mind to serve a purpose. No government is fit to call themselves a government if officials spend as they deem fit without thinking of the needs of the people paying the taxes. When laws are outmoded they need to be changed. People should not get into government to seek their own self interest. This is what it appears now, with Ministers and the President spending money on travel and per diem allowances, and huge loans to renovate their houses, moneys that should be used to develop Ghana's infrastructure to facilitate business and build schools and decent places for our people. What is the rational for government over-bloated spending habits and conduct? The great Greek Philosopher Aristotle argued that, considering the respect and adulation politicians get from the public, they should consider that adequate enough compensation, and in fact should not be paid. Whiles this writer is not arguing for a philanthropic government body, common sense shows that government should rather seek to reduce taxes and find ways to reduce government spending!

Government customs laws allow up to about 55% in taxes and duties at our ports. But it is the assessment of the value on which the taxes and duties are assessed that is the trick. Using their own system, no matter how much one buys a car, it is almost guaranteed that the government's CEPS/Ports and Harbors will collect about 100-200% of the purchase price from every person. If you bought a VW Tuareg for $30,000 and they look at the MRSP value, they can ask one to pay duties based on a value of $58,000. Is this justified to use the Manufacturer's Suggested Retail Price (MFRP) to assess duties and taxes in Ghana? In Twi we call it “apoo-bo”, meaning extortion due to power.

One disgraceful irony, another “apoo-bo” or “kwasea-buo” [taking somebody as a fool] is that Ghana is collecting hundreds of million of dollars at the ports, and yet government does not even have the decency to disclose our annual revenue and how they are distributed to the regions and districts for their own development. This practice of secrecy is what has led to the massive stinky open culture of corruption. It also leaves too much room for mismanagement, as nobody really knows where the moneys are deployed or who gets what. This kind of centralization should have been stopped long ago.

The 1992 GHANA CONSTITUTION has a section on Decentralization. Officials and the President seem to fail to understand this section and how to make it work. Almost everybody knows large amounts of money are collected and large amounts are siphoned by corrupt officials who refuse to even code the right data into any computers one may have. In this modern age, such information as how many vehicles are imported into Ghana, how much revenue is generated and how the revenue is distributed and expensed should be an open system or financial statement that others with the need to know or who have paid into it can read also and refer to. It also facilitates financial auditing. People who have paid into the system and given Tax ID numbers should in fact be able to enter the databases with their Tax ID number as a right, to view such information as well as any status of interest on their imported items. Government should not only think of themselves as an entity or club of privileged people. Government should think and plan what is in the best interest of the tax payers! Regions and Districts have a share in this money, and the money must be equitably distributed and not put in a Common Central fund! If the government is able to purchase or update computers and software, then such information and share distribution should be available online. The Right to Information Act is being debated in Ghana as if it is an option. No! It is not an option to think about. It is a necessary tool for development if we are serious!

OVER-TAXATION in any society leads to temptation to find alternative ways, some of which is corruption or under-invoicing. Corruption robs people of their sense of self dignity when they are forced to lie or forced to live the lie to their families. It also robs the nation. It is an open knowledge that customs officials are rich and own huge houses, whiles their salaries are perhaps not more than $300 per month. However, when taxes are excessive, the temptation to pay somebody [and not ask questions or bother with the receipts] increases. Whiles government is losing, the corrupt officials are gaining. But the government loses more from the resistance of decent people who may refuse to pay other annual taxes unless taken to court. We all know what that means. Taking people to court on such civil matters only creates the PNDC era extortion and a lose-lose situation. It never works!

On taxation and their effects on development, work has been done to show that the more you tax your citizens, the less developed a nation gets. In 1992 a Professor at an American University, Ismael M. Cole, did a research spanning from 1910-1975, using massive amounts of Brazilian data and found the revealing information. He found that “a country's fiscal dependence on trade taxes is inversely related to their level of economic development” (Cole, I.M., Applied Economics, 1992). This was noted to be so after a certain threshold of development. This is termed the fiscal dependence hypothesis (FDH). The idea that a country can develop by taxing the rich and giving to the poor never works!

CLOSED SYSTEMS [as Sociologists may call it], encourage corruption just as dark alleys encourage crime in most metropolitan areas. Let us note that the culture of corruption and forgery of official documents and receipts as practiced in Ghana is not the same overseas. Our secrecy and arbitrary system is what helps promote and perpetuate such corrupt practices. Instead of information being posted or on a website for all to see, a clerk collects money before they disclose the information. The current practice is that if one wants to be able to assess the duties on vehicles they will pay in Ghana, one has to send somebody to Tema [or Takoradi], and it costs C100, 000 and can take a few days. Yes the public will welcome such a new computer database if it works. But other information should be available, and the so-called big men like Mr. Sam Yankyera (Senior Commander? What a title!) should reveal to the press and media how one can assess such database. If we leave it such that only he and a few others can assess it, then the system of corruption is maintained. Why does one need an Agent to clear a vehicle?

Let's compare to cultures overseas where most of these vehicles are imported from. It will be very hard to impossible for one to get a car dealer in America to give you false receipts so that you can avoid taxes in your country in Africa. Are you crazy! Why? Because that same receipt is the one they have to file to their State or County or Federal government. Don't get me wrong. I am not saying that there is no forgery in America. God knows there are million and billion dollar crimes in America, but for God's sake, dealers in America are not our small time road-side dealers in Ghana. They are wealthy businessmen who will not risk their license or jail term to do a small favor of a few thousand dollars to a Nigerian or Ghanaian friend [even if you were their friend]. I doubt if any dealers in Norway, Sweden., UK, Australia, Hong Kong or Canada will do that for you! The question is "Why should they risk their license and possible jail for such small petty forgeries and crimes?" The rule of law works in most developed countries! A good example is the current situation of even powerful US Senate leader Tom Delay (R, Texas) indicted on criminal charges. Will that ever happen in Ghana? Can the Attorney General's office in Ghana ever have such guts? Will President Kufuor ever have such guts to demand Justice?

The point is that it will be still unfair for government to simply claim that they are using computers, and hence give the impression that it is therefore legal an well as ethical and right to charge people based on the MSRP [Manufacturer's Suggested Retail Price]. The government of Ghana is desperate for money, and we all know it. It has been like that since the early 1980s. The government since the time of Dr. Kwesi Botchwey has been trying to squeeze money from people they think have accumulated "more than their share of the wealth" and hence "living above the level of the society", as Dr. Botchwey once wrote. This Marxist-Socialist mindset in fact helped ruin Ghana's economy, with the cedi of C2.7: $1 in 1981 dropping to C6, 000: $1 before Dr. Botchwey resigned in the 1990s. The point is that over-taxation has not proven to help the economy of Ghana or other nations.

BARGAINING to save money is an age old global culture. We do that in Ghana on all things. Most people buy used and even new vehicles by negotiating prices below the sticker or Manufacturer's suggested retail price [MSRP]. Some buy cars salvaged by accident that they know can be repaired in Ghana. The fantasy notion started by Dr. Botchwey and their bully-boys colleagues that surrounded former Flt. Lt [and later President] Jerry Rawlings that Ghanaians overseas are rich oil Sheikhs must stop! The truth is that Ghanaians overseas work hard and long hours every week to feed their families and send money to their other and extended families in Ghana, before they can save for years to purchase a car. If government officials were working that hard at home, Ghana would have been far better today like other nations have done! Any legal means by which Ghanaians in the Diaspora can use to save money, including buying salvage or “accident” cars, is used. As such why should our government seek ways to squeeze more and more from them every day?! According to Nana Otuo Acheampong, hired as consultation to assist the government on this issue, there are 8 levels of taxes and duties and fees, including Duties (15% to 55%), VAT (12.5%), NHIL (2.5%), Ecowas (0.5%), Port Handling and other fees. Why?

If the President of Ghana wants a record of honest contract with the Ghanaians in the Diaspora many of who helped his rise to power, the best he can do is stop to think of his future and the legacy he leaves. Upon this, and the above analyses, here are a few advice and RECOMMENDATIONS:

1. Government should present all revenue collected from the ports and CEPS in open accounting spreadsheet system where taxpayers can see online. The computerization system at the ports should be made for open system which allows customers, provided with a tax ID system, to evaluate their own taxes and duties before they arrive, and also stay open for any person with a tax ID number to be able to assess the data and check the status of their shipment.

2. There should be a cap on how much taxes and duties any Ghanaian government can collect from any citizen or resident at the ports of Ghana. My recommendation is 15% and inclusive of all VAT, NHIL and Ecowas and all fees. This figure should be reduced to 10% in the next 5 years as we learn to broaden the tax base under more skilful system. Ghana as a nation should learn to live under a budget based on our productive efforts in our society. In other words, we must learn to cut our coat according to occur cloth.

3. A Purchaser's receipt should be used and where there is a doubt, phone calls and other means to verify should be used. Where a car has been purchased and used for some years, the Blue book average value as easily obtained on such Websites as Yahoo or CarQuest should be used and acceptable.

4. There should be a PRUDENT SPENDING Law passed by Parliament to limit any President's spending within reason based on the revenues of the nation. Expensive vehicles and travel entourages must stop! Violations of this spending law should be considered criminal, and any President, Finance Committee Members and any authorized person who violates this should be impeached or fired!

5. All revenues from the ports and customs should be shared in a fair and equitable fashion [to be negotiated] between the central government and the regions and districts of Ghana's taxpayers.

6. Government officials should be trained and educated about who really pays their salaries and should be well trained in customer service.

In conclusion, we as a people need to rise to higher levels of human decency for our country, starting with our elected body, to serve the society. We need to demand the best standards and performance; fair and equitable taxation and government cost reduction, and not focus on how much we can squeeze for government from people who actually are the core owners of the system. We should aim at serving our people, and not violate decent laws of humanity with such acts of greed, envy and selfishness that do not bring any blessing on our people and our nation. Kwaku A. Danso, President - Ghana Leadership Union, Inc. (NGO) USA 510-494-8300 (PST) Ghana: 0244-057-566 (c/o Anthony Owusu Williams) Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.