research proposal final work.pdf
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COMBATING CORRUPTION IN THE TAX ADMINISTRATION SYSTEM
RESEARCH PROPOSAL
NAMES INDEX
NUMBERS E-MAIL ADDRESS
AWUSI NYALA ATIKPO 5131550141 [email protected]
AYIVI JULIANA 5131550197 [email protected]
ALBERTA SEDINAM AYIDZOE 5131550191 [email protected]
MARY KWOFFIE ADU-GYAMFI 5131550111 [email protected]
VIDA TETTEH 5131550173 [email protected]
KEZIAH APPIAH NYARKOAh 5131550195 [email protected]
NYAAH YAW JOSHUA 5131550185 [email protected]
SAMUEL ADU-GYAMFI 5131550181 [email protected]
HAYFORD ODAME ABOAGYE 5131550129 [email protected]
PRINCE ADUBOFOUR OWUSU 5131550180 [email protected]
NOVEMBER 17, 2015
ACCOUNTING GROUP TWO
SUBGROUP FIVE
GROUP LEADER’S CONTACT: 0570909410/0548635320/0262331479
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Contents List of Acronyms ......................................................................................................................................... 2
List of figures ................................................................................................................................................ 2
CHAPTER 1 INTRODUCTION .................................................................................................................. 3
1.1 Background ....................................................................................................................................... 3
1.2 Problem statement ............................................................................................................................. 4
1.3 Research Objectives .......................................................................................................................... 6
1.4 Research Question ............................................................................................................................ 6
1.5 Significant of the study ..................................................................................................................... 6
1.6 Limitation ......................................................................................................................................... 7
Chapter 2 LITERATURE REVIEW ............................................................................................................ 8
CHAPTER 3 METHODOLOGY................................................................................................................. 9
3.0.1. Research Design .......................................................................................................................... 9
3.0.2 Population .................................................................................................................................... 9
3.0.3 Sample and sampling procedure(s) ........................................................................................... 10
3.04 Research instrument ................................................................................................................... 10
3.05 Data collection procedure ........................................................................................................... 11
3.06 Data analysis ............................................................................................................................... 11
Reference ............................................................................................................................................ 12
APPENDIX .................................................................................................................................................... 14
1.1Gantt chart Showing How the Proposal Was Completed in Seven Weeks .................................... 14
1.2Proposed Budget ............................................................................................................................ 14
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List of Acronyms
For the purpose of this study the following acronyms have been considered
GDP – Gross Domestic Product
GRA - Ghana Revenue Authority
OECD – Organization for Economic Co-operation and Development
HOD – Head of Department
UEW – University of Education, Winneba
SPSS- Statistical Product and Services Solutions
IBM – International Business Machinery
List of figures
Figure 1.1 – Ghanaians opinion on tax administration (Page 5)
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CHAPTER 1 INTRODUCTION
1.1 Background
Corruption has always been in existence, in one form or another. As far back as the fourth
century BCE, Kautiliya, aSanskirt scholar, wrote, “Just as it is not possible not to taste honey (or
poison) placed on the surface of the tongue, even so it is not possible for one dealing with the
money of the king not to taste the money in however small a quantity. Just as fish moving inside
water cannot be known when drinking water, even so officers appointed for carrying out works
cannot be known when appropriating money” (Kangle 1972: 91)
Combating corruption is high on the agenda of many governments and international
organizations. Corruption creates uncertainty and reduces the transparency of the economic
environment, leading to inefficiencies and lower economic growth. Designing and implementing
policies to reduce corruption, however, is a serious challenge. Entrenched powerful interests who
benefit from corruption have little incentive to change the status quo.
Moreover, even if the political will to fight corruption is in place, there is little agreement on the
most effective policies. Corruption may either deter investment or render it less productive
through its adverse impact on the risk and cost of doing business in African countries like
Nigeria, Uganda, Tanzania, Ghana and Somalia. For instance, the diversion of public resources,
services, and assets to private use in Uganda resulted in deteriorating roads, poor medical
facilities, dilapidated and ill-equipped schools, and falling educational standards (Ruzindana and
Sedigh 1999); also, the international donor community jointly suspended aid to Tanzania in
1994, largely in response to massive irregularities in the tax system. Donors declared that they
would not resume assistance until the government took steps to collect evaded tax, recover
exempted tax, and initiate legal proceedings against corrupt tax officials (Sedigh and Muganda
1999). Over the past two decades many developing countries have implemented instruments to
boost the potential for public sector performance, to finance the social insurance program and for
the repayment of public debt. A country’s revenue generation primarily depends upon its
sufficient capacity to tax more in both economic and administrative term.
The Ghana Revenue Authority (GRA) was set up on 31st December 2009. This chapter
examines recent experiences in the fight against corruption in the Ghana Revenue Authority
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(GRA).Revenue Authority as a central body is to assess and collect specified tax revenue, to
administer and enforce the laws relating to such revenue, and to account for all the revenue to
which those laws apply. In practical terms, the main objective of the GRA was to reach given
revenue targets, expressed as a ratio of tax revenue to GDP. These targets were to be revised
annually on the basis of negotiations between the GRA and the Ministry of Finance and reflected
in the Finance Minister’s budget speech. The GRA was also required to advise the Government
on matters of revenue policy. A key element of the administrative reform was to move the
existing revenue departments out of the Ministry of Finance into a semi-autonomous revenue
authority overseen by a fairly independent Board of Directors. The objective behind this move
was mainly to provide incentives for the staff to improve its performance and thereby increase
revenues. A revenue authority, established outside the civil service system, is not bound by wage
rates and employment regulations that apply to other sectors of government (Devas et al. 2001, p.
214). This meant that the GRA, in principle, could pay rates which would enable it to attract and
retain highly qualified staff. Hence, the consultants involved in setting up the GRA
recommended that management and professional staff remuneration should be competitive with
the private sector (Therkildsen 2004, p. 71).
1.2 Problem statement
In general, Ghanaians perceive inherent challenges with the country’s tax system. It is quite
disturbing to discover that a strong majority (68 percent) claims that it is “very difficult or
difficult” to find out what taxes or fees one is supposed to pay to the government. About a fifth
(19 percent), however, expressed a contrary opinion. Thus, to Ghanaians, the principle of
certainty is lacking in the country’s tax system and law abiding citizens who desire to honor their
tax obligations may have to contend with the high transaction costs (e.g. time and money)
involved in searching for information about the taxes they are expected to pay. This
inconvenience could affect citizens’ commitment to their tax obligations and consequently
discourage compliance. Equally disturbing is the perceived lack of transparency. In the use of tax
revenues as well as the perceived lack of integrity among tax officials. Three-quarters of
Ghanaians (74 percent) claim it is “very difficult or difficult” to find out how government applies
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revenues from taxes and fees. Just a little over a tenth (14 percent) hold a contrasting opinion.
The integrity of Ghana Revenue Authority officials is very low in the eyes of Ghanaians. Half of
Ghanaians (50 percent) perceive “some” tax officials to be involved in corruption. Another 41
percent also consider “most or all” of these officials to be corrupt. Thus, to the ordinary
Ghanaian, the country’s tax administration stinks with graft. It is not surprising therefore to find
that 58 percent have little or no trust at all in the GRA; just 40 percent trust the institution. One
glimmer of hope for the GRA and its officials however is the finding that most people (90
percent) still accept the institution’s legal mandate to demand taxes from citizens.
Figure 1.1
Question Response option percent
Find out what taxes/fees to
pay
Very Difficult + Difficult 68
Very Easy + Easy 19
Don't know 13
Find out how govt. uses
money from taxes/fees
Very Difficult 74
Very Easy + Easy 14
Don't know 12
Tax officials corrupt Some 50
Most + All of them 41
None 5
Don't know 4
Tax authority always right
in demanding taxes
strongly Agree + Agree 90
Strongly Disagree +
Disagree
5
Neither Agree nor Disagree 3
Don't know 1
Evading income/property
taxes owed
Very Difficult + Difficult 64
Very Easy + Easy 19
Don't have to pay taxes 2
Don't know 14
How often people evade
taxes
Never or Rarely 64
Often or Always 30
Don’t know 6
Source: Ghana Afrobarometer survey 2012
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1.3 Research Objectives
The main objective of this study is to present issues on how to combat corruption in tax
administration.
Specific objectives will include;
a) Identification of the causes of corruption in tax administration.
b) Analyzes of the role of procedures for administering custom duties, excise duties, and
value added tax (VAT).
c) Developing policy measures for combating corruption in tax administration.
1.4 Research Question
This research is set to answer certain questions such as:
a) What are the causes of corruption in tax administration?
b) What are the available procedures for administering custom duties, excise duties, and
value added tax (VAT)?
c) What are the policy measure for combating corruption in tax administration?
1.5 Significant of the study
The importance of the study is as follows:
The results of the study will help to restructure Tax Administration Agencies. Tax administration
agencies could be restructured functionally. The duties of various functionaries within the VAT
department should be streamlined, with an eye to minimizing personal interactions with
taxpayers (Purohit 2001a). Internal audits must also be strengthened. The selection of an audit
must be based on risk assessment based on information from local offices, the results of audits
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conducted in the past, and the results of the computer assessment of returns received in the
department. It is equally important to establish a wing of auditors specially trained to examine
the accounts of vendors. Check posts must be abolished and enforcement strengthened.
The outcome of this study will help to Severely Punish Corrupt Officials: Punitive action against
corrupt officials can have an important deterrent effect. The role of the media is important in
publicizing the punishment of corrupt officials. Pecuniary penalties for corrupt behavior should be
harsh enough to discourage officials from engaging in wrongdoing. In addition to pecuniary
penalties, in some severe cases of corruption, tax evaders need to be publicly denounced or
imprisoned. Stringent laws for punishment of corrupt officials, along with the confiscation of
property amassed through bribery, will help reduce corruption. Such laws must apply to domestic
offenders and foreigners alike.
Provide Tax Officers with Ethics Training
Intensive training of officers in ethical conduct is of paramount importance, even in countries that
lack good governance (Huther and Shah 2001).Course contents should include the laws and rules
of the tax being administered and emphasize ethical values such as integrity, honesty, public
service, justice, transparency, accountability, and the rule of law. Training should be repetitive in
nature, followed up with refresher courses. Officers should be aware of existing anticorruption
measures, as well as their responsibilities and the liability involved.
1.6 Limitation
Time will be a major constraint because it will not be easy combining lectures and this research
work. Access to information will be very difficult, as tax officials will be reluctant to give out
information they describe as confidential. Another limitation foreseeable in this research will be
the inability to get a complete and comprehensive data on all tax payers in the country. Inadequate
financial support to assist us carry out the study will be another constraint which will affect the
quality and quantity of the data for the study.
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CHAPTER 2 LITERATURE REVIEW
According to Peter Eigan, Chairman of Transparency International (TI).Development Partners, in
recent times, have shown increasing concern about corruption in recipient countries. Corruption
in poor countries is a now perceived as a direct threat to the security of richer countries who
therefore have a stake in the fight in developing countries to stamp out corruption and alleviate
poverty. Where millions are left in misery and poverty thus these are breeding grounds for
hopelessness and for planting the seeds of terrorism. Fighting corruption is also fighting terrorism
as without corruption the attacks of September 11 could not have taken place.
Again, On December 17, 1997 ministers of 34 countries including 29 from member states of the
Organization for Economic Co-operation and Development (OECD) signed a landmark agreement
aimed at eradicating bribery of foreign officials. The agreement sought to encourage its signatory
countries to introduce legislation making payments of bribe to foreign officials no longer tax
deductible and criminalizing the payment of bribes to foreign government officials.
Our empirical review will look at how corruption can reduce growth by increasing public
investment while reducing its productivity.
Corruption can reduce growth by increasing public investment that is not adequately supported
by expenditure on operation and maintenance.
Corruption can reduce growth by reducing the quality of the existing infrastructure. A
deteriorating infrastructure, not surprisingly would tend to increase the cost of doing business for
both government and the private sector – for example through congestion, power outages and
accidents – and thus lead to lower output and growth. Corruption can reduce growth by decreasing
the efficiency of the revenue collecting agencies and consequently the domestic revenues needed
to finance productive spending.
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CHAPTER 3 METHODOLOGY
This chapter will present the method used in carrying out the research. It will comprise of the
research design, population, sample and sampling techniques (participants and how to select
them), research instruments, sources of data, the procedure for data collection and the method of
data analysis.
3.0.1. Research Design
Descriptive cross sectional research design is chosen for the research project. Cross sectional
designs aim at determining the frequency or the level of a particular attribute and potential risk
factors in a defined structure. Cross sectional research is used to examine one variable in different
groups that are similar in all other characteristics. In Cross-sectional design there will be no loss
to follow up because participant are only interviewed once, and are normally based on
questionnaires. This study focuses on combating corruption in the tax administration system.
According to Bickman and ROG (1998), the advantage of descriptive research is that it can
describe large population.
However there are some challenges related to the use of descriptive survey design. First,
Confidentiality is a big challenge of descriptive research. Subjects that researchers question may
not always be truthfully answered and instead respondents will give answers that they feel the
researcher wants to hear. Cross sectional survey design will be good for this study because it
involves the collection of information from any given sample of population elements only once.
3.0.2 Population
A population can be defined as the collection of individuals or object known to have similar
characteristics. It can also be said to be a generally large collection of individuals and objects that
is the main focus of the scientific query. Our population for this study will be employment,
investment and companies income taxpayers as well as tax officials in Ghana.
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Our accessible/ sample population will be tax officials in selected GRA offices and taxpayers
(individuals and companies) in selected organizations within the Accra metropolis.
3.0.3 Sample and sampling procedure(s)
According to Dr. Anthony Picciano, sampling is selecting a group (subgroup) from a much larger
population that is similar in its traits distribution of the larger population. Simple random technique
and convenient technique will be used to select respondents within the organizations indicated for
this study. The probability sampling technique (simple random) will be suitable for this study
because it will afford each respondent an equal chance of been selected for the study. The non-
probability technique (convenience) will also be appropriate since it is less expensive and less time
consuming.
The sample size for this study will be determined using the mathematical formula developed by
Miller & Brewer (2003) illustrated as follows
𝑛= 𝑁/[1+𝑁(𝛼)2]
Where, n is the sample size, N is the sample frame (i.e., target population), α is the error margin
and 1 is the constant term.
3.0.4 Research instrument
Questionnaire will be used to gain statistical data from our respondents for the exercise. This form
will comprise of three aspects. The first aspect will elicit information on respondents’ demographic
characteristic such as gender, age, educational attainment, position or rank, marital status, salary.
The second and third aspects will be measured on a four point likert scale to obtain data with
regards to their views on combating corruption in tax administration.
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3.0.5 Data collection procedure
To embark on the procedure, it will be incumbent to obtain an introductory letter from the HOD
of Business Education Department, UEW, to introduce the researchers to the selected
organizations where the study will take place. Next, this letter will be submitted to the heads of
the selected organizations. After permission has been granted by the heads of organizations, the
questionnaires will be sent personally by the researchers to the participants, explaining the content
and purpose of the questionnaires to the participants. The researchers will give the respondents
30minute within which they are to fill and complete the questionnaires and submit them to ensure
that the maximum responses are obtained. Finally, the researchers will send a letter of appreciation
to the various organizations to express their gratitude for their willingness and participation in the
survey exercise.
3.0.6 Data analysis
Data gathered from the field work will be sorted and analyzed using IBM Statistical Product and
Services Solution (SPSS) version 20.0 for Windows. Descriptive statistics, frequencies and
percentages, means and standard deviations will be used to present results of the preliminary
analysis and research question. Finally, pie charts and bar graphs will be used to present
respondents demographic characteristics.
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Reference
Approaches, A., & References, A. (2014). Approaches to curbing corruption in tax administration
in Africa Query 1 Corruption in tax administration in Africa Overview Evidence of corruption in
tax, (June).
Armah-attoh, B. D., & Awal, M. (2013). Tax Administration in Ghana : Perceived Institutional
Challenges, (124), 1–9.
Corruption in Tax Administration. (1972), 285–302.
Environment, B. (n.d.). Survey on Bribery and.
Fjeldstad, O. (2006). Corruption in tax administration. Lessons from institutional reforms in
Uganda, 93–126.
Hall, B. C. (2005). THE GROWTH AND CORRUPTION CORRELATION : IT’S IMPACT ON
THE ACHIEVEMENT OF MIDDLE INCOME STATUS, 1–12.
Imam, P. A., & Jacobs, D. F. (n.d.). Effect of Corruption on Tax Revenues in the Middle East.
Aggarwal, Pawan K. 1991. “Identification of Non-Filer Potential Income Tax Payers.”Asia
Pacific Tax and Investment Research Centre Bulletin 9 (6): 217–24.
Andvig, J., and K.O.Moene. 1990. “How Corruption May Corrupt.” Journal of Economic
Behaviour and Organization 3 (1): 63–76.
Asher, Mukul G. n.d. “The Design of Tax Systems and Corruption.” Public Policy
Programme, National University of Singapore.
Barber, K. (1997), ‘Popular Reactions to the Petro-Naira’, in K. Barber (ed.) Readings in African
Popular Culture, Bloomington, IN: International African Institute in association with Indiana
University
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Press, pp. 91-8.
Frey, B.S. (1997), Not Just for the Money – An Economic Theory of Personal Motivation,
Cheltenham,
UK: Edward Elgar.
Gauthier, B. and R. Reinikka. (2001), ‘Shifting Tax Burdens Through Exemptions and Evasion:
An Empirical Investigation of Uganda’, Policy Research Working Paper no. 2735 (December),
Washington DC: World Bank.
OECD, 2005, Consumption Tax Trends: VAT/GST and Excise Rates, Trends and
Administrative Issues, 2004 Edition (Paris: Organization for Economic Cooperation
and Development).
OPEC, 2004, Annual Statistical Bulletin (Vienna: Organization of Petrol Exporting Countries).
Rodriguez, Francesco, and Dani Rodrik, 1999, “Trade Policy and Economic Growth: A Skeptic’s
Guide to Cross-National Evidence,” NBER Working Paper No. 7081
(Cambridge: Massachusetts: National Bureau of Economic Research)
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APPENDIX
1.1Gantt chart Showing How the Proposal Was Completed in Seven Weeks
Weekly
activities
Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7
Background
Literature
methodology
Referencing
Submission
1.2Proposed Budget
ITEMS/ACTIVITIES ESTIMATED COST
Data bundle Ghc100
Stationary Ghc 10
Printing Ghc 10
Transportation Ghc 50
Refreshment Ghc 20
Total Cost Ghc 190
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