Avoiding Tax, Avoiding National Responsibility
This paper presents comprehensive information on Illicit Financial Flow (IFF) and explores issues associated with evaluating its impact in Ghana. Ideally, it might be possible to objectively assess the impact on performance in the country and compare that to the developed countries where IFF is less. Nevertheless we cannot do this without relying on the scanty literature from Department for International Development (DFID), Ghana Revenue Authority (GRA), Extractive Industry Transparency Initiative (EITI) and other agencies which have developed indices that could correlate performance, autonomy and reform measures that analysed, compared and inferences made about the impact of IFF.
The requirement to exercise considerable judgment about how to isolate the impact of IFF in Ghana’s tax administration is complex. Performance data, such as revenues collected, audit coverage, debt collected, taxpayer services has little information about IFF since most of it goes unrecorded.
The term IFF is a very broad topic therefore we are not attempting to discuss every aspect of it. We only limit ourselves to discussing and analysing the concept of IFF in the context of Ghana, how institutional failure and sophisticated systems of foreign companies are linked to Illicit Financial Outflows (IFOs), economic and social implication of financial loss occasioned by IFOs and the solutions to tackling it.
IFF ranges from illegal activities such as money laundering, tax evasion, bribery and corruption. Businesses and top government officials often use developed countries as their safe havens for illegal money transfers. Combating IFF depends on the quality of both national and international policies and regulations and government commitment to implementing them.
As we attempt to critically analyse the concept of IFF in the Ghanaian environment, how institutional failure and sophisticated systems of foreign companies are linked to IFOs, economic and social implication of financial loss occasioned by IFO and the solutions to tackling these problems.
It highlights Ghana’s performance against international standards for combating IFF, focused on money laundering, tax evasion, bribery, asset recovery and the role donor agencies play in resolving this problem. Limited public data is described using policy reference for compliance reviews and international agreements.
IFF mostly leaves their country of origin under the umbrella of commercial financial system, therefore anti-money laundering and counter-terrorist financing (AML/CFT) regimes are effective tools to prevent illicit funds from being withheld, received, transferred and managed by banks and financial institutions.
Fighting tax evasion is important in any country and Ghana is no exception because tax evasion is a major source of IFF from developing countries. Combating tax crimes requires effective exchange of information among countries. For the time past, the number of agreements on exchange of information between developed countries and developing countries have steadily increased and these resulted in deterring tax evaders and increasing the amount of taxes paid voluntarily while automatically exchanging of information is becoming more widely recognised for its effectiveness.
Ghana’s tax systems suffer from weak institutional capacity and corruption of officialdom, and therefore often lack the capacity to engage effectively in exchange of information. According to The Global Financial Integrity (GFI) over USD 1 trillion in estimation is paid each year on bribes alone in the developing world. As a result, the 1997 Organization for Economic Cooperation and Development (OECD) Anti-Bribery Convention tasked itself to the criminalization of bribe payers outside of developing countries and its effective prosecution aimed at bring a stop to IFF. As the sanctions for foreign bribery offenses are increasing among OECD countries, others have created loopholes for bribe payers in their legal frameworks.
1.0 WHAT ARE ILLICIT FINANCIAL FLOWS
The international Tax compact (ITC) in plain terms describe IFF as dirty money that is illegally earned and transferred, sometimes beyond national borders. This illegal money is generated through illegal means such as corruption, bribery and embezzlement of national wealth, drug trading, illegal arms trading, human trafficking and tax evasion. The Global Financial Integrity (GFI) in 2010 gave rough estimates that Africa has lost about US$854 billion in cumulative capital flight between 1970 and 2008 alone  . In a related estimation Diis Policy Brief (November, 2009) said for every dollar poor countries receive in a form of development assistant more than eight times the same amount is illegally transferred back to the developed world. 
1.1 MEASURING ILLICIT FINANCIAL FLOWS
By nature, illicit financial flow is difficult to measure because they are not declared and therefore easily disregarded. This is due to the fact that the magnitude of tax evasion and avoidance is hard to measure as the phenomena are complex to observe and precise data is lacking, ITC( December, 2010)
This difficulty makes it hard to rely on empirical findings for analyses; therefore most analyses are based on estimation with data from IMF and World Bank. As a result, quantifying tax evasion and avoidance as well as identifying the underlying factor is equally a difficult task, it brought about the introduction of different estimation techniques, hence difficult to make meaningful comparisons of the extent of loss
The GFI estimates corporate income shifting from US$35 billion to US$160 billion per year. Individual Tax evasion is estimated to cause revenue losses in developing countries between US$15 billion and US$124 billion annually. 
1.2 ECONOMIC AND SOCIAL IMPLICATIONS OF ILLICIT FINANCIAL OUTFLOW
Year on year developing countries face the problem of huge sums of money been transferred out of their jurisdictions illegally. This phenomenon thwarts the efforts of Overseas Development Agencies (ODA) and local investments agenda. The most immediate impact of such illicit flow is a reduction in domestic, public and private expenditure and investment; this translates to fewer jobs, hospitals, schools and ultimately reduces development, OECD (2003)  .
Poor countries have weaker institutional, legislative and administrative capacity and do not have suitable frameworks to deal with illicit flows emerging from multinational companies in relation to transfer pricing; the lack of ring fencing in Ghana’s oil and gas sector is creating a gap for companies to transfer their tax obligations to other sites, (GRA).
The harmful effects of illicit financial flows include draining the poor countries’ ability to marshal their own private and public funds and therefore lowering the amounts of finance available for development, undermining their institutions, distorting economic activity and facilitating illegal activities. Centre for Global Development (December 2013).
To begin with, IFF directly lower the funds available to the government, this can happen as a result of reduced tax revenue or inappropriate spending that could otherwise be used on public services such as schooling or health care. It also increases the inequitable distribution of tax revenues and can contribute to income inequality across parties
IFFs directly lower national savings and capital available for private investment and prevent countries from receiving appropriate benefits from their economic production. Lower investment translates into fewer infrastructures and raising unemployment. They redirect resources to the informal sector of home country or other countries. IFFs also pose a risk to the stability of financial markets and undermine effective financial regulation. For some countries, illicit financial inflows might pose bigger risks than outflows, through the exchange rate effects, Centre for Global Development (December 2013).
Additionally, an illicit financial flow weakens citizen’s willingness to pay taxes and thereby undermining the tax regime. It reduces morale and governments accountability towards citizens as well as lower investor’s confidence. IFFs propagates tax avoidance through corruption and bribery, they could help keep corrupt politicians and other elites in place (Azémar 2010) and sustain criminal activities, IFOs misappropriates aid inflows and does not increase support for aid and other development policies in rich countries. some countries facilitates the activities of illicit financial flows to thrive by providing tax havens, offshore financial centres and by allowing people or entities to escape or undermine the laws, rules and regulations of other jurisdictions elsewhere. Some banks, law and accounting firms or multinational companies sometimes take advantage of weaker institutional, legislative, technical or administrative environments through corrupt officials in poorer countries to escape tax payment. (Shaxson & Christensen 2013)  .
1.3 TACKLING ILLICIT FINANCIAL FLOWS
The issue of IFF is firm on the programmes of leading political initiatives like the G20 and the G8 but various elements of it are also enshrined in UN instruments, such as the United Nations Convention against Corruption (UNCAC), which constitute the global framework for many of the current instruments in place to combat corruption and illicit flows. Development agencies have played an important role on this agenda, but more can be done (2003). 
1.4 WHY AVOID OR EVADE TAX
According to ITC (December, 2010), A lot of reasons could be attached to why people avoid tax, and it is only important for us to understand this behaviour of tax avoidance. These reasons are categories into four main blocks: Low tax morale, High costs of complying with tax laws, Low ability of tax administration and Fiscal courts to enforce tax liabilities.
Tax payers expect some kind of benefit in return for the taxes paid. The government failure to provide sufficient basic public goods and services, tax evasion and avoidance provide justifications for avoidance. (Pashev, 2005; Everest-Phillips, 2008; Lieberman, 2002; Brautigam et al., 2008).
Tax rates and overall structure of the tax system influence perception of fairness. If the tax rate on corporate profit is moderately low, but individuals are confronted with a high tax rate on their personal income, ultimately they may perceive their personal tax burden as unjust and choose to declare only a part of it. So can multinational companies easily take advantage of tax loopholes, and contribute to the perceived unfairness of the system. High tax rates increase the tax burden of taxpayer which creates a high percentage of tax evasion. In situations where transparency is lacking high level of corruption is perceived. In such situations the tax payer is unsure if his paid taxes are used to finance public goods and services, and therefore willingness to pay suffers and it becomes more likely that they evade their tax liabilities. High compliance costs, the cost of accessing tax information and the processes of filling tax forms could be inimical to tax evasion and tax avoidance. Most businesses worry more about the administrative burden than about the actual tax burden. In such instances compliance costs are assume to be very high and the probability of the taxpayer complying with such a great variety of taxes is low, ITC (December, 2010.
Lack of proper execution of a tax regime by tax administrators creates loophole for tax evasion. Shortfalls in tax collection procedures as well as weak capacities of tax administrations to detect and prosecute tax violators are both factors that contribute to a low enforcement of tax legislation. Inability of tax administrators to identify and administer firms that are liable to tax payments is a growing challenge in the country. Although tax revenue from GRA grows year by year they still face this difficulty. Additionally, unclear responsibilities regarding the collection and administration of specific types of taxes by different departments of GRA like the small taxpayer unit, the medium taxpayer unit and the large taxpayer unit lead to inefficiencies and tax losses. Also, the capacities of tax administration influence the way tax policy is implemented. Thus, both tax policy as well as tax administration have to be taken into consideration when designing successful tax reforms. Otherwise, the proper functioning of the overall system is affected, ITC (December, 2010).
A strong tax investigation body is necessary for the detection and trial of cases of tax fraud. Insufficient capacities in tax administrations reduce the probability of detecting evasion, so capacity is an important prerequisite for any enforcement activity.
1.5 MODES OF TAX EVASION AND AVOIDANCE
There are different means by which illicit financial flow is deployed by corporations with the aim to minimize their tax liability. These take the form of misreporting and non-declaration of corporate profits to circumvent direct tax obligations resulting from mineral extractions. According to estimates reported by GFI, developing countries have lost $858.6 billion –$1.06 trillion in illicit financial outflows in 2006.
Faked invoices among colluding exporters and importers serve as a normal means to illegally transfer money from developing countries to financial accounts abroad usually with the intention to evade taxes (GFI, 2010).
Under or over statement of business transactions subject to VAT is a type of tax evasion that is receiving increased attention in the course of broader adoption and rising rates of VAT in Ghana. Trade fraud includes under-reporting of sales by falsifying records and accounts allowing the fraudster to collect taxes without remitting them to the tax authority. Similarly, overstating purchases and forging invoices to increase the amount of VAT refunds are methods applied by some new businesses where corresponding levels of sales are not expected instantly.
Across borders carousel fraud takes advantage of the zero-rating of exports between multi-country trade activities which has been branded as most vulnerable to VAT fraud. Carousel fraud comes in two forms
- The collection of VAT payments without remitting them to the corresponding tax authority (missing trader fraud).
- Illegitimately claiming a tax refund for the good that is exported.
Tax is also evaded through misclassification of commodities subject to different VAT rates with the idea of reducing tax liabilities or increase claims for tax refunds. Goods are also smuggling across national borders as a way of evading VAT liabilities and indirect taxes such as customs and excise duties.
The inefficiencies in administration and enforcement of taxes are exposed to bribing tax officials especially in the developing world by companies. For instance, IFFs that are directed to offshore accounts sometimes result from proceeds that are realized through criminal activities such as the smuggling of goods or fraudulent manipulation of VAT records or bribery. This is done through Profit shifting and Tax incentives.
Usually subsidiaries of multi- national entities (MNE) are treated as separate entities by tax authorities. They are liable to taxes in the country where they operate. The separate entity approach is considered as a viable option to avoid double taxation as profits of the MNE are taxed only once in the residence country of the subsidiary. However, the approach can also be applied by the MNE to minimize the overall corporate tax burden. To this end, the MNE engages in tax planning activities to shift profits within the affiliated group from high tax to low tax countries.
Profit shifting is achieved by manipulating transfer prices, these are pricing of goods and services traded within the group, exploiting intra-group loans and deliberately choosing the allocation of profitable assets. To reduce its overall tax burden the MNE try to set higher Transfer prices for products and services that are transferred to divisions located in high-tax countries whereas low transfer prices are used for transactions with low tax countries. This way, costs for inputs are overstated and taxable profits generated in high-tax countries are artificially minimized.
Internationally, barter trade and transfer pricing are closely related mechanisms of profit shifting. If goods and services are directly bartered, instead of being sold and bought, the firms involved in the exchange are mainly interested in receiving fair value in return for their bartered goods. Bear in mind that prices are only fixed for purposes of taxation, as a consequence, artificially reducing these prices may help all parties involved to reduce their liabilities for taxes related to sales. As a means of intra or inter-company financing, it represents an additional instrument of tax avoidance as tax deductibility of interest paid offers an incentive to grant inter-company loans to affiliates located in high tax countries, thereby substantially lowering their tax obligations.
Intangible assets such as patents, trademarks and copyrights that generate substantial profits out of license payments are assigned to subsidiaries located in high tax countries whereas cost intensive units such as R&D or central services are located in low tax countries to reduce taxable profits.
Governments promote certain economic activities by lowering tax rates, by postponing tax liabilities and by giving tax holidays. Not all tax exemptions are implemented for some legal or societal goal. Nepotism and corruption give room for ‘’tax evasion with an official stamp on it.” Certain individuals, firms, or groups receive favourable tax treatment from tax official due to their societal influence and lobbying – which is formally legal, but nevertheless illicit which has negative effects on government.
Governments of developing countries lobby with multinational companies with the aim of attracting FDI through offering tax incentive. Tax incentives for foreign investments not only enable foreign firms to avoid taxation but in turn give rise to illegal tax evasion activities of domestic companies to re-labelling domestic investments as FDI , ITC (December, 2010)
1.6 MEASURES TO IMPROVE TAX COMPLIANCE
Tax compliance contributes to sufficient revenue mobilization, the absence of it resulting to evasion and avoidance of tax payments. It also involves the taxpayer’s knowledge on tax procedures necessary for the fulfilment of their duties. The tax payer’s morale improvement will amount to transparency, accountability and efficiency of the state with the ultimate aim of providing services for its citizens. These will provide a sound state of societal relationship which requires taking into account the entire public system , ITC (December, 2010)
1.6.1 TAXPAYER EDUCATION AND TAXPAYER SERVICE
The importance of taxes and their functions to a country is not always clear to the taxpayer. Likewise tax liabilities as well as requirements to comply with the tax regime such as filling out different tax forms might be difficult to understand. By way of taxpayer education and taxpayer service, the taxpayer can be informed and educated about the tax regime, ITC (December, 2010)
1.6.2 ADDRESSING TAX COMPLIANCE COSTS AND ADMINISTRATIVE COSTS
Aside voluntary tax compliance, governments should develop measures that reduce taxpayers’ costs of fulfilling their tax liabilities. Most tax administrations move towards a customer service approach which reflects the growing awareness of the need to offer a quality service to the taxpayer and to be responsive to public concerns. For example reduction of the number of tax forms and officers assisting clients in filling out documents both hard and soft copies , ITC (December, 2010)
1.6.3 ADDRESSING WEAK ENFORCEMENT AT THE NATIONAL LEVEL
Tax administration reforms are critical in attempt to effectively strengthen enforcement. Measures include establishing Taxpayer Units within the communities and human resource development in the area of tax fraud, good remuneration and rewards in order to attract and recruit capable staff and to minimize the risk of corrupt practices. Bureaucratic processes should be reduce to the bearers minimum, introduction of unique taxpayer identification numbers are considered a useful instrument as they facilitate the cross-checking of information between different types of taxes such as VAT and income tax . In addition, monitoring and auditing of tax payments and tax arrears are easier if a unique taxpayer identification number exist. LTUs help tax administrator to focus all available capacities on those firms that contribute significant amounts to domestic revenues. Ghana illustrate that the establishment of LTUs is particularly suitable to target limited administrative capacities in developing countries. Complex tax laws cause confusion and uncertainty among tax officials and taxpayers. Addressing deficiencies in the tax system is therefore as important as process orientated reform actions that enhance the user-friendliness and transparency of the taxation procedure.
Particularly a complete reform of the tax law is recommended than a gradual reformation which creates difficulties in the system, it is important to note that detecting and prosecuting tax violators depends on data availability and data quality. Tax fraud and avoidance are also a result of a weak judiciary. Strengthening the rule of law will contribute to strong tax regime. This includes stiffer punishment and prosecution of violators through effective execution by the law courts. Higher penalties act as a deterrent and help to improve tax compliance. This can be achieved if government strengthen the capacities of investigative authorities.
1.6.4 INTERNATIONAL ENDEAVOURS TO STRENGTHEN NATIONAL TAX LAW ENFORCEMENT
International mobility of capital flows creates a serious challenge for countries on the field of taxation. A single country cannot solve the issues tax evasion and avoidance creates. Revenue shortfall due to tax evasion and avoidance at the international level causes severe problems to pro-poor developmental agenda of developing countries. As a result solving this problem on an international platform (regional and bilateral level) is eminent. This is possible through exchanges and co-operations among member countries to promote transparency of MNEs’ activities such as unveiling mispricing and transfer pricing practices which requires cross-border information exchange between domestic tax administrations, auditors and foreign public authorities.
Tax Information Exchange Agreements (TIEA) aimed at enhancing co-operation with low-tax jurisdictions including tax havens to foster exchange of information which helps to disclose illegal forms of profit shifting must be encouraged.
Harmful tax practices that are detected through consolidation of financial accounts of MNEs can be curbing through increase in transparency in bookkeeping by introducing financial accounting standards that require disclosure of disaggregated and unconsolidated accounts at the country level. Increasing regional and international cooperation in tax regimes require participation in international networks, organizations and forums because exchange of best practice approaches and information sharing on those platforms are enormous. e.g African Tax Administration Forum (ATAF) reveal Strategies,
2.0 COMBATING MONEY LAUNDERING
The desire for good governance has propelled the donor community to turn their attention to issues which require effective international cooperation on the part of both developed and developing countries. ODA believe that investing in anti- corruption activities are the surest ways to achieving this. DAC has financed some development agencies in developing countries to help fight cross-border crime, corruption and money laundering. Between 1999 and 2012 USA has investigated 236 international bribery related cases out of which 160 received some form of sanction, Hungary and Korea sanctioned all 26 and 20 cases respectively. Out of 92 cases 69 pleaded on agreement in Germany within the same period see figure 2.
The United States also funded its Department of Justice though the United States Agency for International Development (USAID) and the Kleptocracy Initiative by placing US prosecutors in prosecuting authorities in developing countries. UK uses its DFID to finance institutions responsible for fighting corruption in many developing countries.
With the assistance of Australia, Denmark and Norway the World Bank has supported the International Corruption Hunters Alliance to fight corrupt activities in over 130 countries (International Corruption Hunters Alliance, 2010).
The United Kingdom uses ODA to finance the International Corruption Group (ICG), with the aim of strengthen local agencies to fight corruption in UK companies that operate within and outside of UK as well as foreign politically exposed person’s active in the United Kingdom by bring corruption cases to prosecution.  IFF related programmes received considerable support from ODA In 2011, total support to this category reached 11% of total ODA expenditure. 1.1% was spent on anti-corruption organisations, Public financial management receive 11%. For a breakdown by sub-category and their allocations and for other sub-category that has elements of IFF related support, such as customs and border controls, strengthened tax systems, Support to legal and judicial development etc, OECD (2014). 
2.1 GHANA ON ILLICIT FUNDS
Before any assistance from the develop world, Ghana must take a bold step towards investigating and initiating the search for stolen funds. Asset recovery will not materialise if destination countries are expected to be responsible for the entire asset recovery process all alone from case initiation to investigation and return of assets. Authorities in Ghana also have to show a real commitment to fighting corruption by naming and shaming her nationals and large taxpayer companies that are found guilty of corruption and theft of funds, OECD (2014). Ghana is not doing well, the lackadaisical attitude presented by government towards prosecuting senior government officials who are accused of corruption and parliament failure to pass the whistle-blower act has marred every effort to retrieve stolen money. The Auditor General’s Report is but only a ritual that is performed by the public accounts committee of parliament wasting public resources and time going through the report without much action takes to punish offenders or retrieve appropriated funds. Government has also showed reluctance to retrieve some moniess awarded to the state eg, in the case of Amidu vs Athorney-General (Wayome case), SADA, and GYEEDA allegations and many others are identifiable corruption prone areas government is reluctant to investigate.
Only a few cases on tax matters are heard in Ghana. The reason for this is the relative cost of litigation, delays in the court system and poor information and education about tax regime in general, In The ‘absence of information there is misinformation’ the absence of sufficient information about tax laws and the tax liability firms, the limited information on tax reliefs such as tax deductions, tax exemptions, tax rebates and tax holidays show the difficulty that exist between the taxpayer and the tax collector. It is clear that mechanisms for improving information flow between tax administrators and tax payers are essential  Atuguba (February 2006).
3.1 CONTROLLING TAX EVASION
Taxation plays an important role in economic development by sustaining the existence of the state and financing both social programmes and infrastructure investment. It also aids in the allocation of resources, redistribution of income, and correction of negative externalities as well as protection of domestic industries by restricting imports.
Many developing countries fail to generate the requisite tax revenue to finance their public expenditures. Like some of these countries, Ghana depends heavily on taxes to generate the much needed revenue for development. In an attempt to reduce the complexity of the tax system and discourage tax evasion and generate sufficient revenue, Ghana’s tax system has undergone several structural reforms since 1983, the initial tax reform was largely aimed at restoring the tax base which had been battered by the constant over-valuation of the domestic currency. With the hope that it will broaden the tax net, lower the tax burden on economic agents and reduce tax evasion.
The PNDC Law 116, 1985 investment code provided a wide range of tax incentives and benefits to foreign and domestic investors. The Value Added Tax in 1995 was also expected to minimize changes in the behaviour of economic agents, to enhance the efficiency of the tax administration and improve upon the equity of the tax system.
A major step taken in this reform was the conversion of the Internal Revenue Service (IRS) and Customs, Excise and Preventive Service (CEPS) into the Ghana Revenue Authority, an autonomous corporate body with new organizational structures (GRA) in 2009. GRA was expected to strengthen the role of the revenue institutions by achieving increased revenue collection and change the structure of the tax system to make it more efficient and equitable. But before GRA, in 2007, the tax administration management information system was computerized and a unique identification number assigned to taxpayers for easy tracking by tax collectors.
The introduction of the e-government project in November 2011 is another big step; it was aimed at electronically linking GRA to the Registrar General’s Department (RGD) for assurances that GRA would have access to the database of registered businesses for easy tracking and collection of tax payments. In spite of the fiscal reforms tax evasion continues to be a problem in Ghana  .
Ghana became a signatory to the EITI in 2003, since then the country has been implementing the initiative especially in the mining sector. The EITI is an initiative between all industry players (governments, companies and civil society organisations) aimed at promoting transparency in the flow of revenues from extractive companies to host countries on the bases of transparent reporting on the revenue streams and other benefits. The EITI is intended to encourage greater transparency in the extractive sector. This would enable citizens to make informed demands for fair and sustainable use of revenues generated through the exploitation of natural resources. EITI requires Ghana Extractive Industries Transparency Initiative (GHEITI) to produce annual reconciliation reports that reconcile the payments by the extractive sector companies to receipts by the government of Ghana. It is expected to collect, analyse and aggregate annual inflows and outflows of the Government of Ghana in this sector. When properly conducted it will unearth all forms of corrupt activities, tax evasion and illicit out flows.
4.0 THE ROLE OF AID AGENCIES
Multilateral organizations such as the World Bank, IMF, Europe Aid and the OECD or some Aid agencies and international organizations have been drivers in front of many of the programmes which aim to counter IFF, Such transparency initiatives like the EITI, Publish What You Pay, The Oslo Dialogue on Tax and Crime, and the Open Government Partnership are directly or indirectly supporting Ghana in strengthening her capacities to combat tax evasion, transfer pricing, money laundering and stolen asset recovery. Only 1% is recorded as the amount of ODA funds being spent on activities to counter IFF, yet experience shows that the return on investment in terms of benefits for developing countries is significant.
OECD donor experience suggests that for each USD 1 spent on investigating the proceeds of corruption originating from the developing world, and transferred to OECD countries, a significant amount has been tracked and frozen, with a large proportion of that sum repatriated to the treasury of the developing country in question. Some save heavens of IFF such as Switzerland, Netherlands, France, USA, and UK made some efforts to return stolen money, see figure 3
4.1 OVERSEAS DEVELOPMENT ASSISTANCE AND ILLICIT FINANCIAL FLOW
Civil Society Organisations (CSOs) over the years have focus on campaigning for developing finance reforms and structural change to provide aid for public goods and services amidst growing demand to protect international public goods. It is important to note that these do not present a roadmap for ODA’s activities in Ghana. It is only left with Ghana to identify priority areas for development. It is increasingly becoming aware that development finance is becoming thinner by day whiles the country face many financing issues related to international policy framework. This call for CSO campaign on broader structural issues and other development finance priorities to prevent companies from tax evasion and illicit capital flight into tax heavens, to regulate financial and capital flows, reduce damaging financial speculation on essential commodities and reform the banking sector, to promote fair and equitable debt workout mechanisms that cancel illegitimate debt and reform international financial institutions, to provide incentives for changed behaviour through new taxes, to insist on the promotion of transparency and accountability.  .
Several factors add up to reduce Poverty and enhance development; some of these factors far exceed just the nature and availability of resources. Many countries such as Malaysia, china and South Korea made good use of their limited resources right after gaining independence while Ghana could not make the best out of her abundant high level of financial resources from self-rule. Coup de tats, Conflict, bad governance, corruption and lack of domestic policy decisions are the woes of Ghana.
Over the past ten years Ghana has made the most impressive strides by managing to increase the share of GDP going to public spending and private investment. Like most developing countries Outflows are larger than inflows, and a large part of this is due to failings in the international system. Most major outflows are caused by financial secrecy and the facilitation of IFF by tax havens. In addition, it is important to note that developing countries are both sources of inflows and outflows, and that the level of outflows from developing countries has been increasing significantly.
IFF results in resource constraints in Ghana which do not permit investments in basic services and infrastructure necessary for poverty reduction, promoting economic growth and protecting the environment. Also, public resources have the potential to target the poorest and most vulnerable in society in a way that private flows cannot. When countries depend on a natural resource for income, this undermines economic development through Dutch disease and provides an incentive for ruling elites to focus on gaining a slice of these revenues, rather than expanding economic opportunities. 
Given the OECD’s DAC Paris Declaration on Aid Effectiveness (PDAE), DFID has supported VAT in Ghana in two projects reflecting the two attempts to introduce VAT in June 1995 and from 1997 to 2000. The Good Financial Governance Programme introduced by german cooperation for international cooperation (GTZ) in March 2004, to improve efficiency and effectiveness of tax legislation and tax administration also supported these efforts.
It is difficult to directly attribute the rise of the tax-to-GDP ratio to any one single factor. In this case, however, improvements in tax administration seem to have made a significant contribution. The rebasing of the GDP in 2010 collapsed the tax to GDP ratio; however there has been a remarkable growth of over 3% from 12.7% in 2010 to 15.9% in 2011(www.gra.gov.gh) 
One of the decisive reasons for increase in revenue performance was observed in the 2004 establishment of the Large Taxpayer Unit (LTU) which can be seen as a step towards integration. The LTU collects all tax types and duties from the 350 largest taxpayers of the country. Furthermore the GRA made the auditing of taxpayers and collection of information on tax liabilities more effective and accurate (Christian 2008). 2011performance recorded 46.6% over that of 2010 which attributed to reforms such as integration and modernisation through information sharing between customs and domestic taxes; streamlined clearance on permits; introduction of Ghana integrated cargo clearance system to track location of goods at the ports and streamlined tax exemptions. Further to the tax revenue administration improvements was the commencement of oil production in Ghana  .
Fighting illicit flows from Ghana requires serious commitment to strengthen the capacity of the GRA and its expertise. Political commitment is key and donors can help by supporting committed CSOs (such as Africa Centre for Energy Policy and Imani Africa) and other actors to raise relevant issues in their political dialogue with the government.
Internationally, agencies should also increase their commitment on IFF by acquiring the relevant technical skills needed to engaging with other institutions at home. Having such specialized staff is necessary in order to effectively engage in current debates around illicit flows and to maintain an unbiased and crucial position OECD (2003).
Ghana should consider increasing her network on treaties or exchange of information agreements for tax purposes. Information exchange is an important element in fighting tax evasion and recovering funds. With the use of existing instruments like the Global Forum on Transparency and Exchange of Information for Tax Purposes information is be shared easily.
Ghana lack’s capacity, capacity availability is critical for engaging in legal assistance when investigating, prosecuting and sanctioning all forms of economic crime such as tax evasion, money laundering or corruption, this is because the capacity of law enforcement authorities to investigate and prosecute economic crime is quite limited and this result to long delays in court.
Ghana’s capacity to audit multinational companies and regulatory framework on transfer pricing which is a grey area between avoidance and evasion is low. Donor agencies are advice to provide technical and audit support to tax authorities in the country. Situations where abusive transfer pricing is detected development agencies should be supported by improving the national legislative and regulatory framework to build the necessary technical expertise in the areas of auditing and support tax authorities to prepare criminal cases.
The scale and significance of IFF as well as the channels and methods used to execute them is complex which cannot be left in the hands of civil society organisations alone. This development therefore calls for the Academic institutions to inject strict research Methods and interest into this process.
Development agencies in collaboration with government and universities can engage in internal policy dialogue whereby Ghana would provide an assessment of its risk profile related to illicit flows, including data on estimates on where this exists, and possible counter measures, Fight against IFF must start from their source of outflows. This requires some degree of commitment by authorities to support GRA to carry out its mandate as tax collector. The donor community can also help build political commitment and capacities by raising such issues in their political dialogue with partner countries, and by supporting the increasing number of capable CSOs in developing countries to holding their own leaders accountable, OECD( 2003)  . We hope that the recommendations outlined in this chapter will lead to an improvement in Ghana’s regime. It will also help protect the public purse by working within local and international agencies, institutions and country to identify, track and recover illicit money. These include ensuring customer satisfaction, voluntary tax compliance, better governance, more enhanced steps for dispute settlement and more acceptable international and financial practices. The need to increase the number and competence of capacity of the personnel employed to collect taxes is paramount. Tax information and tax education are lacking even to the moderately sophisticated. This can be improved through publicity and tax education. The idea is to get a precise sense of the particular information and educational needs of the LTU.
Tax administration reflects national administration because the perception of tax administration impacts tax morality, tax compliance and tax revenue levels. Tax payer satisfaction is therefore necessary in tax administration. High voluntary compliance means high revenue and lower collection costs. This could be done through customer service.
Information flow is vital for effective tax administration. Tax payers want to be informed about tax holidays of various kinds that are preview to them. They want rules, processes and forms for tax reliefs be made readily available. The lackadaisical attitude by government toward the passage of the right to information bill and the whistle blowers act into law thwarts the effort of people who are willing to provide information about tax evaders.
Lack of one time judgement in the commercial courts made Tax dispute resolution unpopular with Ghanaians, always reappearing at the court for hearing is a waste of valuable time; this means that a lot of tax disputes are resolved at the administrative level only. It is therefore proposed that a stronger dispute resolution mechanism with the revenue agencies to make them easily assessable, fast and effective resolution of tax dispute, Atuguba (February 2006).
By accepting foreign confiscation orders and providing assistance to foreign jurisdictions is a sure way of eradicating the illicit money saga. Resourcing and training specialist units to investigate stolen assets and prosecute offenders are essential as it enhances information sharing on asset recovery across countries and institutions. The provision of legal and technical assistance and encouraging proper cost sharing arrangement will help solve this problem in Ghana.
Remitting illicit money back to their country of origin provides another window of opportunities for developing countries in a form of additional resources, offering a powerful deterrent as well as justice for the societies whose funds are repatriated. Even though OECD countries have made considerable efforts, repatriation has been discouraging, because only a limited number of countries have returned assets. Countries that succeeded in tracing, freezing and repatriating assets have legal frameworks that permit conviction and prosecutions. Another successful way of securing repatriation is to require proof that excessive wealth has a legitimate origin. Countries (such as Switzerland) whose frame work do not require the bank to reveal names of account holder and other relevant particulars of citizen or foreign nationals before opening bank accounts must step up their game to support fight IFF. Donor agencies have become increasingly supportive in tackling IFF over the years. These international agencies have aided civil society organisations and researchers working on this programme, and have supported countries’ efforts to build capacity in fighting tax evasion, corruption and money laundering. They can play an effective role by supporting the fight against illicit financial flows and strengthening their own preventive and investigative capacities against economic crimes. To mitigate these challenges, strong measures need to be put in place to uncover bribery and prosecute bribe payers. This report recommends strengthening institutions and systems as well as staff training to prevent tax evasion in Ghana.
Center for Energy Research Ghana
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