Ghana, Tax for Development

The overall objective of the project is to realize a sustainable increase of local tax revenues to finance improved basic services to the citizens of the Metropolitan, Municipal and District Assemblies (MMDAs) involved.

Specific objectives are:

• to improve the institutional capacity and procedures of each MMDA to collect revenues and diminish the tax gap;
• to implement IT in each MMDA to support the main tax business processes;
• to improve the capacity of each MMDA to communicate with its citizens;
• to implement participatory planning processes including social contracts with citizens;
• to realize political commitment and leadership and project management expertise on ministerial level and in each MMDA to guarantee sustainability.

The expected results of the project are:

• Increased revenues >25% each year;
• Decrease of tax gap >10% each year
• Increase of budget for public services > 10%
• Increased trust
• Increased taxpayer satisfaction.

The Ghana Tax for Development Project focuses on local tax. In Ghana Metropolitan, Municipal and District Assemblies (MMDAs) are empowered to collect revenues (often referred to as IGF: Internally Generated Revenues and Funds) from a range of sources to complement central government transfers and funding from development partners. IGF over the years should constitute a critical component of local finances.

Nonetheless the overall picture reflects structural, administrative and systematic inefficiencies which undermine the ability of MMDAs to realize the full potential of local revenues. Over-reliance of MMDAs on central government transfers has led to the apparent neglect of improving locally generated revenues. The main project’s aim is to narrow the tax gap: the difference between what can be charged and the actual revenue collected. Out of experience in previous project it is known the tax gap at the MMDA level in Ghana appeared to be between 65 till 90 percent. Narrowing the tax gap will lead to a better financial position of the MMDAs and improvement of service delivery and increase of the satisfaction of the public.

The project focusses on improving property tax, business fees and revenue collection in 33 MMDAs in de Ashanti Region, Central Region and Western Region in Ghana.

The methodology in the Tax for Development Project includes five different modules.

Module 1: Analysis and strategy. In each MMDA an appropriate strategy to solve existing problems will be developed, that focusses not only on improving the quality and performance of the tax administration, but also on improving service delivery to the public. Starting point of the strategy is to have a clear idea of the actual tax gap. An important input will be the priorities from citizens with regard to public services delivery. Thus the strategy will function as a social contract between local government and citizens.

Module 2: Organisation, processes and procedures. In close cooperation with Ministries, two handbooks will be develop that will serve as a guideline for all MMDA staff in Ghana. Producing a handbook manual for all recovery staff, taking stock of all legal instruments available and all operational instruments developed, guarantees that all lessons learnt are written down and that this serves as an instruction to all on how to minimise local tax gaps to the maximum. A second handbook will focus on improving and describing the procedures for building permits and developing operational instruments to support the process.

Module 3: Implementation of the TaxMan solution. A tested software solution, which supports the end-to-end (primary) process of a MMDA, plays a key role in the implementation of the change process. This type of software will boost the necessary changes because it will make the transformation tangible, measurable and sustainable thanks to the structure the software provides. The software will support the processes of property tax, business permits and revenue collection. Each MMDA will receive a sever on which the software will be installed. An implementation handbook and software manuals will be provided to all MMDAs.

Module 4: Taxpayer communication and services. To obtain the buy-in of the public to pay taxes communication is vital. Based on a developed generic communication plan, each MMDA writes and implements a local communication plan, selects communication channels, develops communication materials and develops communication campaigns. The central theme for all communication efforts will be to inform and commit citizens in why paying tax is needed and which services will be rendered out of the extra revenues.

Module 5: Project management. Improvements of tax collection and narrowing the tax gap needs attention to project management as well. At each MMDA, the chief executive will delegate a focal person from their own staff who will bear overall responsibility for the implementation at the MMDA level. During a training programme, the focal persons of the different MMDAs and the chief executives will be introduced in the principles of project management, the roles and responsibilities of MMDAs in the in the Project and the different modules of the methodology used in the project.

Implementation of the modules takes place in clusters of MMDAs in four groups. All activities will be organised on cluster level, meaning that representatives of six or seven MMDAs will meet each other and attend the training sessions and workshops together. The cluster will function as a knowledge platform which will allow the MMDAs to learn from each other not only throughout the duration of the project but also during the post project era. Throughout the entire duration of the project a Ghanaian project team of experts will provide direct and continuous support at MMDA and Ministerial level. The Ghanaian project team will assure a permanent and regular presence and first line of support of experts in the field. The Ghanaian project team gets specialists’ support from VNG International’s tax experts, IT-experts and communication experts, that all have specific expertise in revenue collection. The Ghanaian project team together with the MMDAs will determine what kind of content and type of support is needed from the Dutch experts.