The recent global economic recession and diminished oil prices have burdened the government with the desire to raise revenue from tax without stunting economic growth. There is a need to capture the sources by which the government could widen its tax net and increase revenue generation without overburdening the taxpayer. Outlined below are strategies that can be employed to identify, capture and account for all potential revenue-generating opportunities.
The first is improving the efficiency and transparency of tax administration. A sound and efficient tax collection system plays a vital role in mobilising domestic resources. It comprises well trained staff, watertight enforcement procedures and a transparent process, supported by a strong IT backbone. The government can achieve this in part by implementing the Integrated Tax Administration System (ITAS) proposed in 2013. The ITAS is a comprehensive tax administration solution, enabling tax authorities to streamline and automate tax management processes. All tax returns can be filed electronically with the ITAS, and taxpayers can make payments and even obtain their receipts online. The ITAS also provides an online platform for tax-related enquiries and helps taxpayers obtain guidance or feedback from the tax office at short notice. It will guarantee a proper filing system, making tax remittances and collection easy.
The second strategy is introducing efficient tax reforms. The design and implementation of such reforms will help broaden the tax base, reduce the tax burden on taxpayers, restore confidence and promote voluntary compliance. A growth-oriented tax reform is one that will shift part of the tax burden from income tax to consumption tax through, for example, the enforcement of compliance with value-added tax or taxes on property or asset ownership. In addition, reducing the tax rate would make it less onerous and facilitate the widening of the tax base to include, in particular, the vast informal sector, A third plan is strengthening compliance laws and administrative machinery to combat tax evasion. Strategies that can help in this include the revamping of tax administrative machineries, setting stiff penalties for corrupt tax officials and setting up a vigorous enforcement regime for defaulters. Data is also very important; implementing the National Identity Card Scheme and finding a way to link the Corporate Affairs Commission, bank verification numbers, tax identification numbers and property income distributions will aid efficiency. Setting up a record of the taxable populace will also reduce tax evasion.
A fourth reform is enforcing personal income tax compliance. It is easier to collect taxes from persons who are recognisably within the tax net. This is why the pay-as-you-earn system is one of the easiest taxes to administer. Entrepreneurs and owners of small businesses can easily avoid paying taxes if these are not deducted at the source. Section 85 of the Personal Income Tax Act empowers government ministries, departments, agencies and commercial banks to demand a person’s tax clearance certificate before they can carry out certain transactions.
Fifth, one could encourage voluntary compliance through value-added fiscal discipline. The government should endeavour to provide adequate social amenities and employment opportunities through the judicious use of tax proceeds. This would encourage taxpayers to pay their taxes regularly and provide the government with the moral justification to demand the same. Offering incentives, such as social recognition or tax breaks to companies and individuals that have maintained a high level of compliance over a certain period, will also encourage compliance.
Finally, the recruitment and training of staff is key. Suitable personnel capable of performing the revenue collector’s job should be recruited. Additionally, regular training should be organised for revenue personnel to sharpen up their knowledge and skills.
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