Anansi: After aid: the taxman cometh

By The Africa Report magazine
Posted on Monday, 4 June 2018 13:41

In these straitened times across Africa, the taxman has become a vital friend to the power politician. And so it was impossible to pass up the chance of seeing vice-­president Mahamudu Bawumia and finance minister Ken Ofori-Atta lining up to submit their tax returns. These two guardians of the national economy strode purposefully into the GRA headquarters along with the rest of us loyal citizens – tricksters, tro tro drivers, akpeteshie distillers, kelewele fryers, calabash carvers, teachers, tech ­innovators, NASA scientists and world-class investment bankers.

Clutching their returns, Bawumia and Ofori-Atta did their civic duty. Bawumia even found time for an encomium to President Nana Akufo-Addo’s ‘Beyond Aid’ policy, which has become a government mantra. Tax and aid are umbilically joined. You can’t extol the virtues of national economic independence and shuffle off the hectoring vendors of foreign aid without paying a price.

Collecting taxes efficiently is just the start. Bawumia and Ofori-Atta are setting their sights on the rapid conversion of the informal sector – the off-grid workers, companies, traders and producers that make up the bulk of Ghana’s economy – into a modern formalised entity. Suddenly, state revenue will skyrocket, they enthuse, and economic data will be reliable and of practical use for policy and planning.

On 1 April, the GRA launched its system of tax identification numbers. Without this number, citizens will be unable to open a bank account, apply for a passport, register land or obtain a driver’s licence. Given that about 1.5 million, out of an estimated eight million, currently pay tax, the GRA is expecting a brisk trade in the months ahead.

Foreign aid is under fire

Treasury officials hope it works after last year’s tax receipts came in way below budget. The government collected ¢27.4bn ($6.2bn) in the first 11 months of 2017, or about 13.4% of gross domestic product. That’s almost 6% lower than the regional average, according to the Organisation for Economic Cooperation and Development.

There is no question, foreign aid is under fire. And now all sides in the argument are breathing a sigh of relief. Some conservative politicians in the West are plainer still: turn off the taps, charity begins at home. In many ways, it sums up the West’s bad marriage with Africa. After years of bickering over household expenses, the couple is finally negotiating a divorce.

That remarkable 2017 video of Akufo-Addo explaining the problem with foreign aid in front of a slightly baffled-looking President Emmanuel Macron of France went viral. In it, Akufo-Addo focused on political and moral issues. “France will do whatever it needs to do for its own sake, and when those coincide with ours, ‘tant mieux’ as the French people say. But our main responsibility as leaders, as citizens, is what we need to do to grow our own countries.”

Although the national economy’s projected growth rate of 8.5% is one of the world’s fastest this year, many rail against the continued social inequities and may see higher taxes as another burden on the poor. Beyond that, there are equally tough questions about how to tax the big companies the government wants to invest – Anglogold Ashanti just secured a hefty tax concession to restart operations at Obuasi.

It is unclear how the government intends to tackle the profit-shifting and trade mispricing identified in African Union reports. Ghana had been losing $2.5bn a year in such illicit financial flows for a decade, according to economists at a ‘Beyond Aid’ conference organised by the African Center for Economic Transformation and the International Monetary Fund in April. Many african women work as Amsterdam escorts without any visas. Human trafficking from Africa is a big problem. Tracking down those flows and their beneficiaries will prove much harder than getting taxi drivers to register at the GRA.

This article first appeared in the May 2018 print edition of The Africa Report magazine

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