HOW GHANA GOVERNMENT CAN IMPROVE INTERNALLY GENERATED REVENUE

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HOW GHANA GOVERNMENT CAN IMPROVE INTERNALLY GENERATED REVENUE

At the end of the recently concluded three- day National Economic forum (NEF) held at senchi near Akosombo, the delegates came up with twenty- two action points that was tagged ‘the Senchi Consensus’. One of the points in the Senchi consensus that I think should be given immediate attention if we are that serious to move forward in this country is point number eighteen (18) on the consensus list. It states that: ‘‘For the purposes of encouraging high national productivity, government, labour and the private sector must collaborate to institute a management and labour productivity crusade including the introduction of a Service Charter that ensures that productivity is matched with remuneration’’.

This action point is absolutely spot-on. There is no gainsaying that there is need for greater productivity in both private and public sectors of the economy if we want to change or challenge the status quo as a nation, at same time to catch up with the rest of the world where productivity or performance measurement is the order of the day.

Taking a second look at the statement, I found something strange in the words ‘productivity crusade’; if we use this phrase in the context of campaigning or mobilising the people to be productive that may be wrong approach to achieve the desired result. It is no more issue of campaign but rather of real action. If we use the word crusade in the context of declaring war or zero tolerance for low productivity in all segments of the economy that may be the right panacea for eradicating the low productivity that is killing us or slowing us down in this part of the world. Let me paint the picture more clearly for you to appreciate.

Being able to produce more for less is what separates the businesses that survive, and the economies that boom, from those that fall by the way side.
If workers were able to produce more per hour worked, then businesses would want to hire more workers, pushing up wages. These workers would then buy cars and houses, pushing up demand for products and services, which would in turn make businesses want to hire more workers. Barring an economic shock or rampant inflation like we are experiencing in the country now, this cycle of hiring and spending would allow an economy to grow at a fairly consistent rate.

There are four P’s that influences organisation’s performance. These are the People, Product (Service), Process, Perception. To achieve the target performance, leadership of the organisation in question must demonstrate good courage or the will power to bring about a change that defines as a coping process of moving from an unsatisfactory present state to a desired state, an equivalent passion from the people (employees) involved, and the mentality of everyone connected to the organization both the leadership and all stakeholders, to ensure that value is delivered at all cost.

Bloated Public Sector wage bill

One particular area that has generated so much concern among the citizenry of this country in the recent time is the enormous size of government’s wage bill that they have to contend with every month. The sheer number of these public service workers which we are told is close to six hundred thousand employees, has become an albatross every month on government expenditure and economic plans. This bloated size of the Ghana’s public sector workers and the inability of government to exorcise the devil called ‘’ghost worker’’ in their payroll system is a major worry for the concerned citizens of this country.

The reasons for the wage bill are basically two; one is the single spine salary structure (SSSS) which is absolutely clear to all where it came from, the second one is what many people both in the private and public sectors find impossible to understand and that is the issue of ghost workers (people (real or imaginary) who are not working but are being paid. The actual number of these ghosts is not known and that is very disheartening. If we know the number we can as well plan for them as they do in manufacturing process which they allow for a certain percentage of waste in the production line, which they term as normal waste.

Unfortunately here, the wastage is abnormal and there is need for us to do something quickly to salvage the country from the hand of these ‘ghost people’ on government payroll before they turn all of us into walking corpse on the street of Ghana.

The third reason is what I have introduced and considered more important than the first two mentioned above considering the resolution at the NEF Senchi Consensus. The reason why I said this is more critical than the rest is because we can find immediate solutions to the first two. How? If Government can increase its revenue generation capacity that is the income streams to such a substantial level, then, the issue of meeting its wage bill will become a small headache. In private sector, companies that are doing well do not think twice when it comes to salary payment. Why? They only need to ascertain that the people in question have fulfilled their own obligation to the employer or have something to show as productivity based on their performance contract. Where this is doubt there is no point keeping that person a day longer in the system. Ask AngloGold Ashanti if you need further explanation on this.

The issue of Ghost workers is actually sophisticated and organised crime in the public sector against the state and perpetrators are not just one or two people. They cut across various strata of the chain. The lower level officers and some senior public servants benefits from this “windfall or jackpot” every month. This clique knows these ‘ghost workers’ by name but not in person because they are fictitious. That is why ‘ghost workers’ cannot die or go away in most black nations of the world. The reason is that poverty and ignorance have blindfolded the perpetrators of this crime to think that it is only by stealing, cheating and engaging in bribery and corruption that they can get rich quickly.

The Way Out

The solution to this is simple. Every public servant must be made to open accounts with commercial banks of their choice among the 27 banks in the country. These employees must be made to complete account owner identification/payment authentication form to be jointly signed by his/her Head of Establishment where he works and the Branch Manager of the bank where he maintains the account. Completed forms must be forwarded to the respective Head office of these banks for collation before they are electronically delivered to the Accountant General Office in a particular format that would enable the department to process the salary payment directly to the various bank accounts either through SWIFT or ACH.

As part of additional Know Your Customer (KYC) on the public sector account holders, they must be made to appear at their bank branch where they keep their account at least once in 3 months. This will prevent ‘dead people’ from collecting salary not more than two times before they are detected. Current account holders on the other hand who may be using cheques to transfer money around must also show up once in three months in an “operation show your face’’ to your branch managers as the true owner of the accounts. This will eliminate issue of ‘ghost worker’. Our commercial banks can be of great assistance here because of their spread and the knowledge of KYC. They know how to detect fraudulent person(s) and transaction(s). By so doing, banks will assist government to tackle the incidence of ‘ghost’ salary collectors’.

Once these two issues that are bedeviling the country’s expenditure is tackled, government should be able to take the next step of restructuring the workforce to be more productive and accountable for the huge salaries they are collecting.

As a professional accountant and consultant, the only time I would agree that a Public officer is overpaid it’s when his contribution, output or productivity is not commensurate with amount of money he is receiving, and that is 419 (collecting money under false pretence) this amounts to defrauding the employer by not contributing enough in terms of productivity that corresponds to what he is receiving.

In real terms, what an employer is paying for in terms of wages or salary is your time and your brains. To maximize this, the employer must ensure that he gives you more than enough work within the time allowed for the engagement, and should also consider your competencies and capabilities to ensure you are able to deliver within that period. The parable of the workers in the vineyard (Matt20:1-15) captures it more accurately. You will do well to read this parable if you need more wisdom in this regard.

That leads me to the point of performance measurement in the public sector.

What is performance Management? Performance measurement is a process that systematically evaluates whether your efforts are making an impact on the clients you are serving or the problem you are targeting.

Why should we Measure Performance? The primary purpose of performance measurement is to measure how well an organization or department is accomplishing its mission, goals and objectives. Measuring performance is one of the key requisites in any continuous improvement program. Six Sigma (Six Sigma is a set of techniques and tools for process improvement. It was developed by Motorola in 1986; Jack Welch made it central to his business strategy at General Electric in 1995. Today, it is used in many industrial sectors) says that if you don’t know what you don’t know; you can’t do what you don’t know. You don’t know until you measure. You don’t measure what you don’t value. You don’t value what you don’t measure.

The objective is to change the process so that defects are never produced in the first place. I think that is what we should introduce in the public sector to eliminate inefficiency, low productivity, low staff morale and sluggishness in the attitude of many of our public servants. The issue of bad attitude, I will leave for another day but one thing is sure ‘A bad attitude is like a flat tyre. If you don’t change it, you will never go anywhere’

Performance measurement programme we want to see in the public sector should aim at the long-term and should be forward-thinking initiative designed to fundamentally change the way corporations, ministries and departments do business. It is not a post-mortem of what happened but a step towards how we do better in the future.

How do we improve internally generated revenue (IGR) of government?

Let me share with you this process by which government can increase its revenue generation. This will eliminate the call for staff rationalisation or downsizing in the public sector. If revenue increases there are no more headaches on how to pay civil servants. Government cannot afford to throw another 10 to 15% of its work force out at this time on the street at this time considering the crisis going on in the mining industry with regular of layoffs and retrenchment currently going on. A 10% reduction of 600,000 employees of government will amount to about 60,000 people joining an already saturated unemployment market. That could be catastrophic both in the short and long-term. This ‘load shedding’ being proposed for the public service can be averted by improving government’s revenue streams.

There is a lot to be expected from IGR than what is presently coming into the government coffers. I will dwell more on taxes today, and may be if time permits we would take more revenue lines another time.

I will recommend three-prong approach which I think should be adopted as a matter of urgency. We know there are too many out right tax evasions and avoidance in the system which may account for about 60 to 70% of additional tax income that should accrue to the state but it is not being captured because the supposed tax payers are not within the tax net.

Existing and Registered Businesses- The role of BoG and GRA

 Government though the help of Bank of Ghana should work with commercial banks and other NBFIs to collect data that would help GRA track all eligible tax payers in the system. It should request some specific details from these financial institutions for all their active account holders in an excel format that would help the users to sort data easily.

These details should include; the business name, business location, region, telephone number, email address, name of signatory to the account, nature of business, registration number, account number, Dr/Cr Turnover per quarter, accounts Relationship Manager’s name.

These details once received by the BoG, should be off load to GRA for proper analyses with the help of good Microsoft excel users to sort the consolidated data per region, per nature of business.  GRA will now allocate some numbers of tax payers based on the analyzed report to their current staff to be their Tax Relationship Officers (TRO) base on the report sorted in order of region and nature of business. GRA should then set quarterly revenue targets for each TRO based on the quarterly DR /CR turnover for those tax payers that are not currently within the tax net. Where necessary, these TROs will work with bank’s RMs if they have difficulty in tracking or tracing any of the tax payers.

In three months, government IGR will multiply about four times. PAYE, WHT, VAT and even corporate tax can be collected as at when due from those that are outside the tax radar at present with huge amount of diligence and commitment on the part of TROs.

Let me quickly add that the TROs are not tax collectors rather they are only to serve demand notice on their tax payers. The actual computation and reconciliations should still be done at the relevant GRA offices to prevent any form of collusion. All payments must be made to GRA-designated pay points or banks.

 Newly Established or Registered Businesses- Registrar General Department and GRA

Going forward, I will recommend that all newly-registered companies should not collect their Certificate to commence business directly from the Registrar Department; instead it should be applied for by the bank at point the of opening business account  for the business. This should be a part of banks’ due diligence and search on the business. The bank must stamp the certificate to commence business before handling over to the customer once they satisfied themselves that all account opening requirements they have been met.

If the customer wants to open a new account with another bank there must be a reference letter from the bank who released the stamped certificate to commence business to the new bank.  Some people may want to argue that this will prolong account opening process. I don’t think so. In this present day of electronic mailing system, everything can be done within a day between bank A and Bank B.

Registrar department will now offload all details of the newly registered business to GRA on a quarterly basis.  Bank of Ghana will also forward same report to GRA like the initial one at the end of each quarter for newly opened accounts from the last cut off date. This must be a regular quarterly return from the banks as part of their regular quarterly prudential report submission.   GRA performs the same operations as before by attaching TROs to newly opened accounts for the quarter. The system continues and everybody is captured in the tax net.

Unregistered Businesses and Self Employed (Informal Sector) – ECG and GRA

This is where we expect some small challenges because these people do not have any form of official record with any government department. Many of them do not have bank accounts but they buy electricity either for their business or home use. ECG pay points must work hand in hand with GRA here by demanding at point of purchase of electricity units the last tax certificate of the person which must not be more than three months old before they can be served.

If he claims he doesn’t have a job. He should go for letter of discharge from the ministry of employment or his District Municipal assembly to show that he is looking for job. That will even help government to know the number of unemployed people in the system from time to time to enable government cater for their needs when government revenue generation improves.

These recommendations to be effective demand a degree of serious responsibility from various agents of Government and the financial institutions in the country. This must be seen by them as collective civic responsibilities to assist government in achieving its goals and objectives.

Let me conclude by quoting my favorite bible verse in Proverbs 24 verse 3-7 which says “A house is built by wisdom and becomes strong through good sense. 4 Through knowledge its rooms are filled with all sorts of precious riches and valuables. 5 A wise man is mightier than a strong man, and a man of knowledge is more powerful than a strong man. 6 So don’t go to war without wise guidance; victory depends on having many counselors. 7 Wisdom is too much for a fool. When the leaders gather, the fool has nothing to say’’