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KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY, KUMASI
INSTITUTE OF DISTANCE LEARNING
VEHICLE INCOME TAX (VIT) IN GHANA, CHALLENGES AND PROSPECTS, A
CASE STUDY OF KUMASI METROPOLIS
A THESIS SUBMITTED TO THE INSTITUTE OF DISTANCE LEARNING, KWAME
NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY, KUMASI IN
PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
COMMONWEALTH EXECUTIVE MASTERS IN BUSINESS ADMINISTRATION
(CEMBA)
BY
YEBOAH KORANTENG JNR
APRIL, 2011
2
DECLARATION
I hereby declare that this submission is my own work and no part of it has been presented for
another degree in this University or elsewhere except where due acknowledgement has been
made in the test.
YEBOAH KORANTENG JNR. ……………………………… …………………..
(CANDIDATE) (SIGNATURE) (DATE)
MR. ARISTOTLE AYENSU ……………………….. ………………….
(SUPERVISOR) (SIGNATURE) (DATE)
……………………………. ………………………. ………………….
HEAD OF DEPARTMENT SIGNATURE DATE
3
DEDICATION
This submission is dedicated to God the Father, God the Son and God the Holy Spirit; and also
to my mother, Maamepa Mercy Owusu Nuamah.
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ACKNOWLEDGEMENTS
I acknowledge the Lord God Almighty for giving me both the spiritual and physical strength,
wisdom, understanding, knowledge, financial resources and more importantly, experienced
people who helped me in diverse ways to accomplish this project work.
In addition, this dissertation would have never come to fruition without the use of other
peoples work. I would also like to thank my supervisor Mr. Aristotle Ayensu, a facilitator at
the Institute of Distance Learning, KNUST-Kumasi whose healthy criticisms transformed my
way of undertaking the research.
I would also like to thank my mothers, Madam Mercy Owusu Nuama and Madam Rose
Yeboah as well as my siblings and other family members for their immense contributions to
the success of this work.
My sincere thanks go to the Regional Director of IRS Ashanti- Mr. R.N. Kalou, the District
Managers and Staff of Internal Revenue Service (Ashanti Region) for allowing me use their
facilities and providing the necessary materials to enable me pursue the topic. Special thanks
also go to the Ashanti Regional Directorates of GPRTU and PROTOA. To Apostle and Mrs.
Rigwel Ato Addison, Rev and Mrs. Samuel Offei Badu, Rev. and Mrs. Asamoah Baah, all of
the Church of Pentecost; Deacon Samuel Acheampong, Mrs. Boahene and Mr. Francis
Appenten , I say God richly bless you.
I would like thank the following friends for their support: Miss Abena Animah Korankye, Miss
Rebecca Ofori and Miss Gloria Adams. I am responsible for any short falls, but constructive
comments and criticisms for further improvement of this write-up are most welcome.
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ABBREVIATIONS/ACRONYMS
CEPS Customs Excise and Preventive Service
CIT Chief Inspector of Tax
GDP Gross Domestic Product
GPRTU Ghana Private Road Transport Union
GRA Ghana Revenue Authority
ID Identifiable Groups
IRA Internal Revenue Act
IRS Internal Revenue Service
LI Legislative Instrument
LTU Large Tax Unit
NRS National Revenue Secretariat
PNDCL Provisional National Defense Council Law
PROTOA Progressive Transport Owners Association
RAGB Revenue Agency Governing Board
SWOT Strengths Weaknesses Opportunities and Threats
TCC Tax Clearance Certificate
TIN Tax Identification Number
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VAT Value Added Tax
VATS Value Added Tax Service
VEILD Vehicle Driver Inspection and Licensing Division
VIT Vehicle Income Tax
VITS Vehicle Income Tax Sticker
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TABLE OF CONTENT
TITLE
PAGE………………………………………………………………………………………i
DECLARATION……………………………………………………………………………….ii
DEDICATION…………………………………………………………………………… 3
ACKNOWLEDGEMENTS…………………………………………………………………4
ABBREVIATIONS/ACRONYMS………………………………………..……………………5
TABLE OF CONTENT………………………………………………………………………vii
LIST OF TABLES………………………………………………………………...……...…..xiv
LIST OF FIGURES…………………………………………………………………………..16
LIST OF APPENDICES……………………………………………………………………...xvi
ABSTRACT…………………………………………………………………………………xiii
CHAPTER ONE………………………………………………………………………………..1
GENERAL INTRODUCTION………………………………………………………………1
1.0 Background of the study…………………………………………………………………1
8
1.1 Statement of Problem…………………………………………………………………….2
1.2 Goal and Objectives of the study………………………...……………………………...5
1.3 Research Question of the Study……………………………………………………….....6
1.3.1 General Reseach Question of the Study……………………………………………….6
1.3.2 Specific Research Question of the study……………………………………………….6
1.2 Relevance of the Study…………………………………………………………………...6
1.5 Scope of the Study………………………………………………………………………9
1.6 Methodology…….………………………………………………………………………9
1.7 Limitations of the Study……………………………………..………………………....10
1.8 Organization of the Study………………………………………………………………10
CHAPTER TWO……………………………………………………………………………...11
LITERATURE REVIEW…………………………………………………………………...11
2.1 Introduction……………………………………………………………………………..11
2.1.0 Definition of Taxation………………………………………………………………...11
2.1.1 Definition of Income Tax and Income…………………………………………….….12
2.1.2 Definition of Income by the Judiciary………………………………………………...12
9
2.2.0 Evolution of Taxation in Ghana………………………………………………………13
2.2.1 Integration of the Revenue Agencies under a Single Authority…………………...….13
2.2.2 History of Tax Reform……………………………………………………………..13
2.2.3 Why the integration of the Integration of IRS, VAT Service and Customs……….15
2.2.4 Trends in Modern Tax Administration……………………………………………..15
2.2.5 Structure of Ghana Revenue Authority…………………………………………….16
2.2.6 The Benefits of Integration…………………………………………………………16
2.3.0 History of Vehicle Income Tax (VIT)………………………………… …….…….17
2.3.1 Reasons for Association Taxation……………………………………………….…17
2.3.2 The Benefits of Associations‘ Form of Taxation of the Informal Sector…………..18
2.3.3 Why Transport Income or VIT was taken from the Identifiable Groups…………19
2.3.4 Internal Revenue Service Management and Administration of VIT…………….…19
2.3.5 First Amendment…………………………………………………………………...21
2.3.6 Second Amendment………………………………………………………………...21
2.3.7 Third Amendment…………………………………………………………………..22
2.3.8 Fourth Amendment …………………………………………………………...……22
2.4.0 Control and monitoring of VIT ……………………………………………………23
2.5.0 Tenets of a Good Tax system………………………………………………………25
2.5.1 Equity………………………………………………………….……………………25
2.5.2 Certainty……………………………………………………………………………25
2.5.3 Convenience……………………………………..…………………………………26
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2.5.4
Economy……………………………………………………...……………………….26
2.6.0 Strengths, Weaknesses, Opportunities and Threats Analysis (SWOT)…………… 27
2.6.1 Strengths……………………………………………………………………………28
2.6.2 Weakness…………………………………………………………………………...28
2.6.3 Opportunities…………………………………………….…………………………28
2.6.4 Threats……………………………………………………...………………………29
CHAPTER THREE………………………………………………………………...…………30
METHODOLOGY & PROFILE OF STUDY ORGANIZATION...... ……………………30
3.0. Introduction…………………………………………………………………………….30
3.1. Population and Scope of study…………………………………………………………30
3.2 Research Design………………………………………………………………………...30
3.3 Sampling Procedures/ Techniques……………………………………………………...31
3.4 Data Collection Tools……………………………………………………………………32
3.4.1 Source of Data………………………………………………………………………...32
3.4.2 Instrumentation and Data Collections………………………………………………...33
3.5 Data Analysis/Presentation……………………………………………………………..34
3.6 Researcher‘s Limitations………………………………………………………………..34
3.7 Profile of Study Organization …………………………………………………………34
3.7.1 Internal Revenue Service……………………………………………………………..35
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3.7.2 GPRTU……………………………………………………………………………….36
CHAPTER FOUR……………………………………………………………………………..38
DATA PRESENTATION AND ANALYSIS………………………………………………38
4.0 General Introduction……………………………………………………………………38
4.1.0 Background Characteristics of Respondents…………………………………………38
4.1.1 Gender of Respond…………………………………………………………………...38
4.1.2 Groupings of Drivers…………………………………………………………………38
4.1.3 Educational Background of Respondents…………………………………………….39
4.1.4 Districts/ Identifiable Groups Assessed………………………………………………39
4.1.5 Age Characteristic…………………………………………………………………….40
4.1.6 Number of Years……………………………………………………………………...41
4.1.7 Vehicle Type…………………………………………………………………………..42
4.2 Performance…………………………………………………………………………….43
4.2.1. Comparative Analysis of the Performance of the Identifiable Groups and IRS ……43
4.2.2 Drivers‘ Rating of both Identifiable Groups and IRS………………………………..45
4.2.3 Responses on the Performance of VIT in the Hands of IRS…………………………46
4.2.4 Monitoring of Transportation Income (VIT)-Identifiable Groups……………………47
4.2.5 Measures Implemented to control Revenue Leakage………………………………...49
4.2.6. Controls implemented by the IRS …………………………………………………50
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4.3 Comparison of Measures to Minimize Revenue Leakages of VIT both in the Hands of
the Identifiable Groups and IRS…………………………………………………………...51
4.4 Mode of Payment……………………………………………………………………….52
4.4.1 Responses on Maintaining the Mode of Payment…………………………………….53
4.5 Response on VIT being given back to the Identifiable Groups or maintained to IRS…54
4.6 The Contribution of GPRTU……………………………………………………………54
4.7 Proper Assessment of Transport Operators……………………………………………..56
4.8 Tenants of s good Tax System………………………………………………………….57
4.8.1 Certainty………………………………………………………………………………57
4.8.2 Convenience…………………………………………………………………………..58
4.8.3 Response on Easiness Respondents………………………….……………………….59
4.8.4 Economy………………………………………………………………………………60
4.8.5 Respondents knowledge on Equity…………………………………………………...61
4.9 SWOT of VIT…………………………………………………………………………...62
4.10 Reasons why VIT was taken from the Identifiable Groups…………………………...63
4.1.1 Response on SSNIT Contribution by Drivers………………………………………...64
CHAPTER FIVE…………………………………………………………………………...65
SUMMARY OF FINDINGS, RECOMMENDATIONS‘ AND CONCLUSIONS… .…65
5.0 Introduction…………………………………………………………………………...65
5.1 Summary of Findings…………………………………………….……………………..65
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5.2 Challenges of VIT………………………………………………………………………65
5.2.1 The limited Coverage of VIT…………………………………………………………65
5.2.2 The Delay in Arrival and Shortage of VIT Stickers…………………………………66
5.2.3 Ineffective Monitoring of VITS on the part of IRS and the Ghana Police Service…..66
5.2.4 The Inefficient Mode of Payment of VIT…………………………………………………67
5.2.5 The negative effect of the static VIT rates.........................................................................67
5.2.6 Lack of Cooperation on the part of Identifiable Groups………………………...……68
5.2.7 Low level of VIT Awareness among Non Governmental Organizations and
Educational Institutions……………………………………………………………………..68
5.3 Prospects of VIT…………………………………………………………………..….68
5.3.1 The widening of the tax net to include all commercial transport operators …………………..69
5.3.2 The viability of the transport sector ……………………………………………………………69
5.3.3 Increase in the number of commercial vehicles on the road …………………………………..69
5.3.4 The positive impact of Automation …………………………………………………………….70
5.3.5 The discovery of fuel in commercial quantities ………………………………………………...70
5.3.6 Integration of the three revenue agencies ………………………………………………………70
5.4.0 Recommendations for Effective VIT Administration and Management…..…………..71
5.4.1 Internal Revenue Service should be adequately resourced …………………………………71
5.4.2 Timely arrival of Vehicle Income Tax stickers (VITS) ……………………………………....71
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5.4.3 Effective joint morning with police ……………………………………………………………72
5.4.4 There should be improvement in mode of payment of VIT …………………………………..72
5.4.5 There should be regular revision of VIT Rates ………………………………………………..72
5.4.6 There should be improved collaboration between the IRS and the identifiable groups ……….73
5.4.7 Management of IRS should intensify public education ………………………………………..73
5.4.8 Proper utilization of the improve VIT collections …………………………………………….73
5.4.9 There should be conscientious effort from all stakeholders to ensure the improvement revenue
mobilization ……………………………………………………………………………………………73
5.5 Conclusion……………………………………………………………………………...74
LIST OF REFERENCES……………………………………………………………………...75
APENDICES………………………………………………………………………………….80
APPENDIX A………………………………………………………………………………80
APPENDIX B………………………………………………………………………………86
APPENDIX C………………………………………………………………………………88
APPENDIX D………………………………………………………………………………96
APPENDIX E ……………………………………………………………………………...98
APPENDIX F ……………………………………………………………………..……….99
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LIST OF TABLES
Table 2.1 Rate for Vehicles………………………………………………………………21
Table 4.1 Age Characteristics……………………………………………………………40
Table 4.2 Number of Years Respondents Have Been Commercial Drivers………….….41
Table 4.3 Response on the Number of Vehicle Type……………………………….…...42
Table 4.4 Revenue Generated From 2000-2005………………………………………..43
Table 4.5 Responses on the Performance of VIT in the Hands of the Identifiable
Grou…………………..…………………………………………..………...45
Table 4.6 Responses on the Performance of VIT in the Hands of IRS…………………46
Table 4.7 Responses on Drivers on Monitoring of VIT by the Identifiable Groups…….47
Table 4.8 Responses on Drivers on Monitoring of VIT by Internal Revenue Service…..48
Table 4.9 Responses on the Number of Times Stickers Were Bought In A Year………..52
Table 4.10 Perception on the Filing of Returns under both Identifiable Group and IRS…56
Table 4.11 SWOT of VIT……………………………………………………………...….62
Table 4.12 Response on SSNIT Contribution by Drivers…………………………………64
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LIST OF FIGURES
Fig. 4.1 Responses on Maintaining the Mode of Payment ……………………………..53
Fig 4.2 Response on VIT being given back to the Identifiable Groups or maintained to
IRS………………………………………..………………………………….54
Fig 4.3 Perception on certainty………………………………......……………………57
Fig 4.4 Perception on convenience…………………….…………...…………………58
Fig 4.5 Response on easiness of respondents………………………………………….59
Fig 4.6 Perception on the increase of VIT by Government……...……………………60
Fig 4.7 Perception on Equity of VIT…………………………………………………..61
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LIST OF APPENDICES
Appendix A Internal Revenue Amendments to VIT………………………………………..80
Appendix B Internal Revenue V.I.T Working Document…………………………………..86
Appendix C Questionnaire to Drivers………………………………………………………88
Appendix D Interview Guide for Regional Director and District Managers of IRS……..…96
Appendix E Interview Guide for IRS……………………………………….………………98
Appendix F Interview Guide for Management of Identifiable Groups………………..…...99
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ABSTRACT
Vehicle Income Tax (VIT) is one of the innovative measures implemented to widen the tax
base in the informal sector. Identifiable Groups such as Ghana Private Road Transport Union
(GPRTU), and Progressive Road Transport Owners Association (PROTOA) were in charge of
the management of transportation income or Vehicle Income Tax (VIT) until 2003 when it was
re-assigned to Internal Revenue Service (IRS). There is a school of thought that (VIT) should
be maintained with the identifiable groups. The Internal Revenue Service also asserts that it is
managing the Vehicle Income Tax better than the identifiable groups.
This study was therefore to assess the challenges and prospects of VIT administration with
Kumasi Metropolis as a case study. To achieve the goal, the following objectives were
accomplished: comparison of revenue mobilization of VIT under the management of the
identifiable groups and IRS, the strengths, weaknesses, opportunities and threats affecting VIT
administration, as well as evaluation of VIT administration in Ghana within the tenets of a
good tax system.
The study employed both qualitative and quantitative research approach; questionnaires were
administered to the various categories of commercial drivers in the Metropolis. The IRS
management and core staff of VIT at IRS office in Kumasi as well as leaders of the Identifiable
Groups in the Ashanti region were interviewed. SPSS was used in the data analysis.
The study revealed that IRS as compared to the Identifiable Groups performed better in terms
of revenue mobilization in that IRS had 226.40 percentage increase in 2003 as against 18.20
19
percent of the Identifiable Groups in 2002. Additionally IRS was better in terms of coverage of
VIT and control of VIT leakages and revenue mobilized.
Despite the successes achieved by IRS in the administration of VIT, significant weaknesses
revealed were the identification of the true taxpayer, non filing of returns by transport
operators, shortage of VIT stickers, delays in bringing in VIT stickers from Head Office and
poor monitoring.
It is therefore recommended that the management of IRS clarify the real taxpayer, come out
with measures to deal decisively with shortage and late delivery of VIT stickers and team up
with the police to do effective monitoring. It is hoped that Ghana as a nation would improve its
revenue base by implementing the above recommendations.
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CHAPTER ONE
GENERAL INTRODUCTION
1.0 Background of the Study
Informal sector activity is a dynamic process which includes many aspects of economic and
social theory including exchange, regulation and enforcement. By its nature, it is necessarily
difficult to observe, study, define and measure. Hart (1973) defined the concept as
―unregulated economic enterprise or activities. Smith (1994) also defined informal sector as
market-based production of goods and services, whether legal or illegal, that escapes detection
in the official estimates of the gross domestic product‖.
The contribution of the informal sector to the growth and development of economy includes
the production of goods and services, job creation and skills acquisition (ISSER, 2003) some of
the contributions include:
Contribution to national output: According to ISSER (2003) ―the role of the informal sector
in the domestic economy is demonstrated in the wide variety of goods and services produced
21
by the sector. In the non-agricultural sector, contribution of trade and commerce is the largest
accounting for 52%, followed by industry with 28%, services 12% and transport 8%‖.
Job creation and income distribution: In the ISSER (2003) report, it is stated that ―the main
source of employment is the informal sector. The sector provides employment opportunities for
at least 80% of the labour force. The sector as of 2000 provided jobs for about 6.7 million
people‖.
Despite the contribution of the Informal Sector to the Ghanaian economy, its contribution to
Total Revenue is woefully inadequate as compared to the Formal Sector.
1.1 Statement of Problem
A large share of economic activity in Ghana remains in the informal sector, which was
estimated at 38.4% of Ghana‘s GDP in 2000. This corresponds to an even higher share of total
employment, and a recent report argues that only 13.7% of the economically active population
is employed in the formal wage economy or by government, leaving 86.3% of individuals in
agriculture and the informal sector (Schneider and Kinnaird 2004, GNCCI 2008).
Almost 95% of revenue for taxation is raised from withheld taxes on formal sector wages,
implying an almost total failure to tax the self employed and employees of firms that escape
the withholding tax system (Bird and Zolt 2005, Zee 2005).
There has been a growing interest in taxing the informal sector1 in most developing countries
for a number of reasons. They included:
22
Revenue needs: There is the need to strengthen revenue mobilization to enable the state to
deliver basic services
The phenomenal size and growth of informal sector: Many formal businesses have fallen
into the informal sector in most developing countries. Recent calculations estimate that the
size of the informal sector in developing countries varies between about twenty percent in
Indonesia to around sixty seven percent of GDP in Bolivia (Schneider 2002).
Impact on tax compliance in the formal sector: Taxpayers in the formal sector are perceived
to be overtaxed while the informal sector continues to operate untaxed (Terkper, 2003).
State legitimacy: In order to regain legitimacy, governments are looking for ways to
incorporate informal activities into formal systems. Taxation is one measure that enables
governments to recognize informal activities without legitimizing the breaking of other rules
and regulations.
Demands from the informal sector: Research shows that those within the informal sector are
willing to pay taxes, specifically when these are in exchange for some legitimacy, stability and
protection from arbitrary harassment from state agents (Dickovick 2003, Baross 1990).
Tax-Accountability link: Citizens who pay taxes will demand more responsive governments
(Gloppen 2002). In short, widening the tax net will spark off a vicious cycle of taxation and
accountability that is at the heart of consolidating democracies (Joshi and Ayee, 2006).
23
It is apparent from the above statement that the Self Employed contribution to the Tax Fund is
woefully inadequate and it is a direct form of Tax Evasion in informal Sector. The average
contribution of Self Employ collections for the period of 2000 to 2006 is a mere 5.1%. (IRS
Training School Manual)
IRS has grappled with the issue of low contribution by the Self Employed to the Tax Fund over
the years. Various measures have been adopted to tackle the problem. One initiative taken by
the Government is the Agency Role played by Occupational Groups (Associations). In 1987,
Identifiable Groups were given the Agency by IRS to collect taxes from their members on
behalf of the Commissioner. The idea was to identify potential taxpayers through their
associations and eventually bring the individual members into the Tax Net. Although the
chalked up some initial success, in the long run, it failed to make any meaningful impact on
Self Employed Collections.
This was mainly due to the abuse of the system by the executives of the various associations
and poor monitoring on the part of Internal Revenue Service (IRS). Consequently, the agency
role of many Organizations was terminated. (IRS Training School Lecture Notes on Public
Finance)
GPRTU appeared to be an agency that contributed significantly to the collection effort of the
Identifiable groups and they continue to enjoy the agency role even after the agreement
between IRS and most of the Occupational Groups had been abrogated. However, research
from IRS indicated that there were a lot of malpractices and tax leakage in the operations of
GPRTU and the other transport Unions. Internal Revenue Service therefore abrogated the
agency agreement with all transport associations and in their stead, introduced the VIT stickers
24
by means of Internal Revenue Regulation, LI 1727 of 2003. (IRS Training School Lecture
Notes on Public Finance)
From IRS sources, there was an increase in transport tax collections in 2003 by 226.4%. (IRS
Training School Lecture Notes on Public Finance)
From that time on, the situation had looked different, instead of maintaining the standard; IRS
has relaxed in its efforts to maximize VIT collections. It has therefore become necessary to
take a critical look at Vehicle Income Tax in order to maximize revenue collections. Most
drivers evade the payment of VIT, others complain about the mode of payment and the
turnaround time of obtaining VIT sticker. Tax administrators are burdened by the work load at
the peak time for the four quarters that VIT is collected. It has now become necessary to look
at ways of satisfying the taxpayers as well as the tax administrators. It is therefore imperative
that new ways are explored to effectively and efficiently administer VIT.
1.2 Goal and Objectives of the study
The goal of the study is to assess vehicle income tax (VIT) in Ghana, challenges and prospects
a case study of Kumasi Metropolis. This was accomplished by achieving the following specific
objectives.
1. Compare revenue mobilization from Transportation Tax/Vehicle Income Tax (VIT) in
the hands of Identifiable Groups (GPRTU, PROTOA etc) and Internal Revenue
Service.
2. Compare VIT management in Ghana to the canons of a good tax management system.
25
3. Identify the strengths, weaknesses, opportunity and threats of VIT administration in
Ghana.
4. Determine measures to improve VIT payment in Ghana.
1.3 Research Questions
1.3.1 General Research Question of the Study
What are the challenges and prospects that affect Vehicle Income Tax
Administration in Ghana?
1.3.2 Specific Research Question of the Study
1. What factors affect the collection of VIT by Identifiable groups and Internal Revenue
Service?
2. How does VIT conform to the canons of a good tax system?
3. What are the strength, weakness, opportunity and threats facing VIT?
4. What are the measures to improve VIT payment in Ghana?
26
1.4 Relevance of the Study
Adam Smith, in his monumental ―The Wealth of Nations‖, published in 1776, summed up the
do‘s and don‘ts of economic endeavor: ―Every man as long as he does not violate the laws of
justice, is left perfectly free to pursue his own interest in his own way, and to bring both his
industry and capital into competition with those of any other man, or order of man.‖ The big
question is that, can Transport Owners obey the law of justice by paying a notional amount of
VIT and not file returns to be assessed properly by IRS or Transport Owners obey the laws of
the land by not faithfully purchasing VIT Stickers?
Governments all over the world play important role in every economy. Adam Smith went on to
define the economic roles of government as: ―According to the system of natural liberty, the
sovereign has only three duties to attend to; first, the duty of protecting the society from
violence and invasion of other independent societies; secondly, the duty of protecting, as far as
possible, every member of the society from injustice or oppression of every other member of it,
or the duty of establishing an exact administration of justice; and thirdly, the duty of erecting
and maintaining certain public works and certain public institutions, which can never be for the
interest of any individuals; to erect and maintain, because the profit could never repay the
expense to any individual or small number of individuals, though it may frequently do much
more than repay it to a great society‖.(Steven L. Slavin, Microeconomics, Sixth Edition)
Government roles have increased from what Adam Smith said to a more direct involvement to
control economy of Sovereign States. The most important source of revenue to a state includes
taxation, public debt and creation of additional currencies.
27
Non Tax revenue is usually derived from Currency, Coinage and Mint; Interest receipts,
dividends and profits, and other sources like fines, grants, domestic and foreign borrowings etc.
Taxation is the most reliable among the various sources which is taken from Income and
Expenditure, Property and Capital transactions and Commodities and Services. (Public Finance
Notes from IRS Training School)
Ali Nakyea (2008) outline the role of Taxation in the National Economy as follows:
To raise revenue to defray the cost of services provided by the state. Taxation is the main
source of income for governments to finance developmental projects and programs.
To reduce inequalities arising from the distribution of wealth;
To restrain certain types of consumption, e.g. alcoholic beverages and tobacco;
To protect indigenous industries, and
To control certain aspects of the country‘s economy, e.g. the balance of payments,
employment, savings, investment and productivity.
It is therefore important to take a critical look at the tax collection system to maximize the
benefits of taxation in the national economy. A cursory look therefore is needed to expand the
tax net to include the Informal Sector of the economy. Transport Owners over the years have
been subjected to the payments of VIT. One may ask if Ghana as a nation is deriving the
needed revenue from the Transport Sector. It is important that VITS be evaluated to achieve
the reason why it was promulgated.
Taxation from Self Employed persons which include VIT has contributed little to national tax
revenue. The contributions of self employed persons‘ to national revenue from 2000 to 2002
have been averaging at 1.7%. From 2003 to 2007, Self Employed persons‘ contribution has
28
reduced to 1.5% of national revenue mobilization. (Revenue Agency Governing Board -
RAGB)
The potential for taxing the informal sector depends on two key factors: a) the degree of
pressure on governments to increase revenues and b) the existence of collective actors in the
informal sector having institutionalized channels for negotiation with the state (Stella 1993).
It is therefore important to consider the trend by analyzing and coming out with appropriate
measures to address the issue. It must be stressed that Self Employed include a lot of people
but Transport Owners have been chosen for this work. Questions that would be answered when
this study is conducted include:-
The reversal of VIT from IRS to the Identifiable Groups
This study will put to rest once and for all the hullabaloo surrounding the institution that
maximizes VIT collection.
The removal of administrative and procedural bottlenecks of VIT administration
1.5 Scope of the study
Although there are ten regions in Ghana, the study was restricted to Ashanti region, which was
selected based on familiarity and convenience. Two districts were randomly selected out of the
five districts of Internal Revenue Service in Ashanti Region in addition to the main regional
offices of GPRTU and PROTOA. The study will covered Officers of Internal Revenue,
Drivers‘ and Management of identifiable groups‘ (GPRTU) in Kumasi metropolis. Data for the
29
survey covered a period of three years each before and after the introduction of VIT - from
2000 to 2005.
1.6 Methodology
The study employed both the probability and non-probability sampling methods. Stratified
sampling technique was used to select respondents for the questionnaire. Non-random
sampling technique was used to select respondents for interview. In all, two hundred
questionnaires were administered to commercial drivers and 3 set of interview guides were
designed for the management of IRS, staff of IRS and top management of indentifiable groups.
1.7 Limitations of the Study
It would have been appropriate to include all drivers and Internal Revenue Officers from the
various districts in the Ashanti region to make the conclusions formed from the study very
general, genuine and reliable. However, since most of the commercial activities take place in
Kumasi, it would not be out of place to restrict the study to the Kumasi metropolis. It is an
undeniable fact that financial constraints, material and limited time account for the inability to
spread the study to cover all regions in Ghana.
1.8 Organization of the study
Chapter one of the study covers the introduction. It encapsulates a brief coverage of statement
of the problem, objectives of the study, significance of the study, limitations of the study and
the organization of work.
30
Chapter two deals with literature review. It covers the history of VIT, applied and theoretical
exposition of vehicle income Tax. Chapter three composes the methodology. It covers the
method used to collect data for the study.
Chapter four covers data analysis. It gives a descriptive report of the study as well as the
analysis of the questionnaire. Chapter five involves the summary of the study, conclusions and
appropriate recommendations.
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
According to Saunders et al, (2007), the significance of research and what is found would
inevitably be judged in relation to other people‘s research work and their findings. The study
reviewed both the empirical and theoretical literature on the subject and then relates it to the
current study. Among the areas reviewed are definitions of taxation and Income Tax, Evolution
of Taxation in Ghana, History of VIT, Canons or Characteristics of a Good Tax system and
SWOT Analysis.
2.1.0 Definition of Taxation
Mr. Justice Wendell Holmes (a famous American Judge) said ―Taxation is the price we pay for
living in a civilized society.‖ (IRS Training Department Learning Material).
31
Taxation is also a compulsory levy on private individuals and organizations made by
governments to raise revenue to finance expenditure on public goods and services as well as to
control the volume of private expenditure in the economy. Taxation can be defined as a
compulsory payment by individuals and companies to the state. It is a compulsory levy
imposed by authority of the law- making body of a country or by a decree that is enforceable
by law (Nsor-Ambala, 2008). The administration of taxes in Ghana is vested in three main
institutions namely: Internal Revenue Service, Customs, Excise and Preventive Service and
Value Added Tax Service. Internal Revenue Service administers Direct Taxes while VAT and
CEPS administer Indirect Taxes.
2.1.1 Definition of Income Tax and Income
C.N Beatrice in his book ―elements of income and capital gains taxation defined Income Tax
as a tax on income or on that which is deemed to be income by virtue of income tax acts. The
definition implied that Income tax is levy on what income tax act deemed taxable.
Internal Revenue Act 2000 (Act 592) which underlies the payment of direct taxes in Ghana
failed to define Income. Internal Revenue Act 2000, Act 592, Sections 7, 8 and 9 classified
income into three main groups namely:
Income from Business
Income from Employment and
Income from Investment (Internal Revenue Act 2000, Act 592)
32
2.1.2 Definition of Income by the Judiciary
The law courts have also given various meanings or definitions to income in its judgment. In
CIT V Shaw Wallace (6ITC 178), it was held that the term ‗income‘ connotes a periodic
monetary return coming in with some regularity or expected regularity from a source.
In Weight V. Salmon (19TC 174), it was held that ‗income‘ may be received in cash or in kind.
When income is received in kind, valuation should be done using the prevailing market rate. It
can be deduced from above definitions of Income Tax and Income that no matter how small
ones income is, he or she is subjected to the payment of tax. Vehicle drivers have always
argued that their income is nothing to write home about so they shouldn‘t be over burdened
with the payment of taxes. However, Vehicle income qualifies under both the Acts and
Judiciary definitions and classification of Income.
2.2.0 Evolution of Taxation in Ghana
In 1839, the first tax revenue agency was established, called the department of customs. Its
mandate was to enforce the payment of local duty from shipping at the ports. PNDCL 144 of
1986 changed its name to Customs, Excise and Preventive Service (CEPS).
Income tax department was the second tax colleting agency created in 1943. It started its first
collection of taxes during the period 1/4/44 to 31/3/45. The name was later changed to Central
Revenue Department and later, PNDCL 143 of 1986 changed its name to Internal Revenue
Service. Value Added Tax Service (VAT Service) was created in 1995. The tax was collected
for few months because of fierce resistance and withdrawn the same year. The tax was
33
reintroduced in November 1998 by the Value Added Tax Act, 1998 (Act 546) and the Value
Added Tax Regulations, 1998 (41646). Resistance to tax came up again when an attempt was
made to introduce VAT. Ghanaians indifference towards taxation is portrayed here too.
(Internal Revenue Training School Teaching Material)
2.2.1 Integration of the Revenue Agencies under a Single Authority
2.2.2 History of Tax Reform
In 1986, Customs, Excise and Preventive Service (CEPS) and Internal Revenue Service (IRS)
were taken out of the civil service and made semi-autonomous self accounting public sector
institutions with separate boards. The National Revenue Secretariat (NRS) was set up in 1986
to formulate revenue policies, manage tax reforms, supervise and coordinate the activities of
the IRS and CEPS.
The ministerial status of the NRS which had no legal backing was lost when it was made a
department under the Ministry of Finance. In 1998, the Value Added Tax Service was
established to administer consumption taxes replacing the sales and service taxes administered
by CEPS and IRS respectively with the objective of widening the tax net. In 1998, the Revenue
Agencies Governing Board (RAGB) Act of 1998 (Act 558) was passed to establish a single
board for CEPS, IRS and VATS. The RAGB began operations in 2001 with the responsibility
to supervise and coordinate the activities of the Revenue Agencies through tax reforms. In
2002, the Taxpayer Identification Number (TIN) was introduced to enhance information
interchange and risk profiling. The Retention of Part of Revenue Act of 2002 (Act 628) was
passed to strengthen the semi-autonomous status of the Revenue Agencies. In 2004, the Large
34
Taxpayer Unit (LTU) was set up to operate on functional lines as a pilot program for future
integrated tax administration. It was also to address the needs of large taxpayers as a one-stop
operation. The establishment of the RAGB and the LTU had prepared the grounds for the
integration of the revenue agencies.
The RAGB strategic plan (2010-2012) issued in March 2009 recommended functional
integration of the revenue agencies under a single authority as the way forward for effective
and efficient revenue administration.
The 2009 budget statement and economic policy of the government of Ghana provided for the
establishment of the Ghana Revenue Authority to integrate the three Revenue Agencies.
The Ghana Revenue Authority Act 2009, (Act 791) was passed in December 2009 to establish
the Ghana Revenue Authority. (Ghana Revenue Authority)
2.2.3 Why the integration of IRS, VAT Service and Customs
Tax administration in Ghana is beset with challenges. These include:
Fragmentation of domestic tax administration between the Value Added Tax Service
(VATS) and the Internal Revenue Service (IRS)
Duplicated support functions across the Revenue Agencies (RAs)
Pursuit of independent reforms by the RAs including computerization and
organizational changes
Lack of a strong, unified headquarters to support and manage the operations of the
Domestic Tax administration and the Customs Service
35
Existence of significant weaknesses in the key functions and business processes needed
to administer a modern tax system.
To address these challenges, the Government of Ghana in line with international best practice,
has legislated Revenue Authority that will focus on functional revenue administration and
improved customer service delivery. (Ghana Revenue Authority)
2.2.4 Trends in Modern Tax Administration
The modern trend is a shift from tax-type to function-based revenue administration. Examples
are revenue administrations in U.K, South Africa, Rwanda, Kenya, Uganda, Tanzania, Sierra
Leone, Malawi, Zambia, The Gambia and Zimbabwe. Incidentally in all these countries, they
were strong in tax type administrations before they moved to the next stage. So it is not out of
place to institute an independent assessment on VIT administration since its inception. (Ghana
Revenue Authority)
2.2.5 Structure of Ghana Revenue Authority
The structure of tax administration has also evolved in Ghana as follows:
The taxpayer/revenue distribution is as follows:
Number of Taxpayers Revenue Collection
Large Businesses: <1% Large: 70+%
Medium Businesses: 5-25% Medium: 10-25%
36
Small & Micro Businesses: 70-95% Small & Micro: 0-10%
VIT is placed under the Small and Micro Business sector because of the revenue it generates
relative to the others like the Large Business Sector and the Medium Business sector (Ghana
Revenue Authority).
2.2.6 The Benefits of Integration
Holistic approach to Domestic Tax and Customs Administration
Reduced administrative and tax compliance cost.
Better customer service delivery.
Improved interdepartmental information flow
Optimal use of resources
Elimination of duplication in support service functions.
An aid to improvement in remuneration
Improved work ethics
Enhanced revenue mobilization
(Ghana Revenue Authority)
2.3.0 History of Vehicle Income Tax (VIT)
2.3.1 Reasons for Associational taxation
37
In 1986 after the creation of the IRS as an autonomous revenue agency (ARA), the Ghanaian
tax administration reforms adopted an explicit strategy to broaden the tax base by targeting the
informal sector. Until then, the informal sector was expected to pay taxes through a system of
an annual presumptive flat tax. However the weak administrative capacity of the IRS, the
inability of informal operators to pay large lump sum annual payments and the perceived
unfairness of the scheme in which high and low income businesses were subject to the same
tax liability, led to poor implementation and tax compliance (Joshi and Ayee, 2002).
In order to bring the informal sector into the tax net, an innovative scheme called Identifiable
Grouping Taxation (IGT) (henceforth associational taxation) was initiated that used informal
sector associations to collect taxes from their members.1 The transportation sector, whose
largest union the Ghana P rivate Road Transport Union (GPRTU) was at the forefront of this
movement towards associational taxation, had found that the prevailing system posed many
problems for its members. The standard assessment, payable yearly at first and then quarterly,
was not affordable, as drivers were required to pay a lump sum in advance. Further the tax did
not take into account loss of income due to breakdown of vehicles or lost workdays.
Corruption was prevalent in the filing of taxes and when obtaining tax and road worthiness
certificates (Joshi and Ayee, 2002b).
2.3.2 The Benefits of Associations’ Form of Taxation of the Informal Sector
Associational taxation addressed some of these problems by using informal sector associations
as agents for income tax collection. The associations had intimate knowledge of the activities
of their members and could collect taxes without much additional effort. The taxes were
collected daily at first, and later weekly to reduce the high costs of printing and monitoring
38
daily receipts, making the payments small and affordable to most members. Moreover, the
taxes were only payable when the drivers earned. If a vehicle was not in use, taxes were not
paid. The associations too had an incentive to collect taxes for the state—they were offered
2.5% of the total revenue collected.
This initial experimentation in the transportation sector was successful and led to its later
extension to 13 other informal activities.1 Such ‗associational taxation‘ has been quite
successful in raising revenues from an area of the economy which had not been paying taxes.
Although the amounts collected (especially in the early years) were small relative to the total
revenue of the IRS—a culture of taxpaying was created in a sector that had until then avoided
taxation (Joshi and Ayee 2006b).
2.3.3 Why Transport Income or VIT was taken from the Identifiable Groups
In the late 1990s Associational taxation led to a situation in which associations collected taxes
assiduously, but were less forthcoming in handing over the taxes to the government. Further,
they were likely to leave members defaulting on their taxes, rather than their membership dues.
The absence of internal democracy in many of the organizations operating in the informal
sector meant that compliance was less a matter of willingness to meet tax obligations than
coercion.
In 2003, the IRS abolished the system of associational taxation for the informal transportation
sector because of the large gap between revenue expected and collected. A standard
assessment system called the Vehicle Income Tax (VIT) was introduced under which transport
owners and drivers pay income tax on a quarterly basis through a sticker system.1 The stickers
are sold for cash to the associations to make them easily available to operators. All signs
indicate that the scheme is successful. In the first two months after its introduction in 2003 the
39
IRS collected 9.2 billion cedis compared with the annual total of 9 billion cedis collected by
the transportation unions in the year 2002-2003 (Daily Graphic, March 9, 2004:
2.3.4 Internal Revenue Service Management and Administration of VIT
Direct taxes are levied on both the formal sector and the informal sector. Taxation of the
informal sector poses a challenge to income tax administration because of its sheer vastness
and constant mobility of the operators. Notwithstanding the formidable hurdles, IRS has
evolved innovative measures to capture an appreciable number of taxpayers with the
introduction of the Vehicle Income for the Commercial Transport Operators and Tax stamp for
the other small-scale employed persons. (IRS Hand Book-IRS 04)
Vehicle Income Tax (VIT) is collected from Commercial Vehicle Operators on quarterly basis.
The VIT system makes it mandatory for commercial Vehicle Operators to buy stickers on
quarterly basis from IRS District offices nationwide. The stickers are issued in various
categories depending on the vehicle-passenger capacity and type of vehicle; example Taxis,
Urvan (trotro), tipper trucks, etc. (IRS Hand Book 2004)
The Identifiable Groups collected tax on Vehicle Income and accounted it to the Internal
Revenue Service. The collections were divided into two categories namely;
Weekly tax payment for Taxies and cars on hire within town; ‗Trotro‘ vehicles and
light dry cargo service (market service).
40
Fare per trip tax payment for ‗One pound one pound‘ cars, mini buses, long distance
passenger buses, container trade in Accra-Tema, long distance cargo trucks and
articulated vehicles, wet cargo vehicles including water tanks and Tipper trucks
(Internal Revenue Training School).
The rate for Taxies, ‗Trotro‘ vehicle and cars Light dry cargo service (Market Service) were
charged as follows:
2.3.5 First Amendment - 2002
Table 2.1 Rate for Vehicles
S/NO. OWNER OF RATE OF TAX (GH ¢)
___________________________________________________________________________
1 Taxi and cars on hire within town 0.50 per week
2 ―Trotro‖ Vehicles 19 seats and less 0.50 per week
3 ―Trotro‖ Vehicles 20 to 34 seats 0.75 per week
4 ―Trotro‖ Vehicles 35 seats and more 10 per week
5 Light dry cargo service (Market service) 0.75 per week
___________________________________________________________________________
(Internal Revenue Regulations L.I. 1698 – 2002)
41
2.3.6 Second Amendment - 2003
Salient issues of Second Amendment included:
VIT Stickers were made mandatory for all commercial road vehicles.
Stickers purchased were to be displayed on the windscreens of all commercial vehicles.
VIT Stickers are to be purchased at the various IRS District Offices nationwide or
quarterly basis.
VIT Sticker system shall be enforced by the police and monitored by IRS monitory
teams in collaboration with the police.
Taxpayers are required to file their tax returns at the end of each year since the payment
of VIT Stickers are only payments on accounts.
Specified rates are provided for various classes of commercial vehicles.
Failure to purchase VIT Stickers attract payment of fine of not less than 25 penalty units and
not more than 50 penalty units or to a term of imprisonment of not less than 2 months and not
more. (Internal Revenue Regulations L.I 1727)
2.3.7 Third Amendment -2004
This amendment substituted: Light dry Cargo (small), Light dry cargo (large) and Long
Distance Cargo trucks and Articulated Vehicles for the following with their quarterly rates
respectively: Since 2005, the rate for VIT has not changed. However, every increase in fuel
results in an increase in transport fares which ultimately affects transport income greatly. Both
42
levies from VEILD and Ghana Road Fund have increased tremendously. (Internal Revenue
Regulations L.I. 1803 2004)
2.3.8 Fourth Amendment-2005
There was new set of rates altogether for all the categories of vehicles.
2.4.0 Control and monitoring of VIT
Many people interpreted the term Internal Control as the steps taken by a business to prevent
fraud – both misappropriation of assets and fraudulent financial reporting. According to the
Committee of Sponsoring Organizations (COSO) study titled ‗Internal Control – Integrated
Framework; Internal Control is a process effected by the entity‘s board of directors,
management and other personnel designed to provide reasonable assurance regarding the
achievement of objectives in the categories of : Reliability of Financial Reporting effectively
and efficiently of operations and Compliance with applicable laws and regulations.(Principles
of Auditing and Other Assurance Services, Fourteenth Edition, Whittington, Pany)
Internal Revenue Act 2000, ACT 592 only established ways that the revenue generated would
be accounted for. The Internal Revenue Regulations also failed to outline ways of controlling
and monitoring of revenue collected. Kwasi Gyasi in his book, ‗Management Accounting, The
43
Invaluable Guide for the Trainee Management Accountant‘ outlined four ways of accounting
control aspects of the control process. They include:
a) The establishment of objectives.
b) The measurement of accomplishment or performance against the objective or standard.
c) The evaluation of the actual accomplishment or performance by comparing the result
against the predetermined standard.
d) And the modification of the policies, programmes and procedures put into place to
achieve the desired objectives with the intention of improving performance or even
modification of the plans, goals, and the predetermined standards.
Internal Control of a large organization includes five components: the control environment,
the risk assessment process, the information system relevant to financial reporting and
communication, control activities, and monitoring of controls. Monitoring serves to assess
the current performance of control and also assesses the adequacy and relevance over time
(Principles, Practice, and Cases, Third Edition, Iain Gray and Stuart Manson).
Transport owners were frequently monitored by the guards of the Identifiable groups and
scarcely the Ghana Police Service. Who monitored the Identifiable Groups to ensure that
VIT was properly administered and accounted for promptly.
In a speech, the Commissioner if IRS noted that commercial drivers were under paying income
taxes by buying Vehicle Income Tax Stickers (VITS) meant for smaller vehicles. He called on
the Ghana Police to arrest such defaulters and prosecute them to serve as deterrent to others
(Revenews 2007).
44
The police called into doing monitoring by looking at the technicalities of administering VIT is
tall order considering their background.
2.5.0 Tenets of a Good Tax system
Adams Smith, a classical economist, propounded four canons of taxation which have been in
use up to date. They are Equity, Certainty, Convenience and Economy. (Internal Revenue
Service Training Department Learning Material).
2.5.1 Equity
A good tax system should be fair to the people who are required to pay the taxes. The subjects
of every state ought to contribute towards the support of the government as rarely as possible
in proportion to their respective abilities. Abilities refer to the economic resources under a
person‘s control (Ali Nakyea Abdallah, Taxation in Ghana: Principles, Practice and Planning –
Second Edition, 2008)
45
Vehicle Income Tax is dependent on the capacity of vehicles. It is assumed that bigger cars
earn more than smaller cars hence the disparities in the taxes charged. Equity is seen from two
points of view; one view is horizontal and the other is vertical. Vertical equity sees that
individual with higher levels of income should pay more taxes. It is a strong base for
redistribution of income. Horizontal equity enters that taxpayers with approximately the same
level of income should pay equal amount of tax (Lecture notes of F.E.K. Akoto)
2.5.2 Certainty
Ali- Nakyea Abdallah (2008) in his book, ―Taxation in Ghana, Principles, Practice and
Planning –Second Edition‖; explained that people should be able to determine their true tax
liability with a fair degree of accuracy. Taxpayers should be clear in their minds as to how
much tax is owing and payable at any point in time. There should be no ambiguities and Tax
Administrations must have no discretionary powers as to how to demand, that is, the Tax
Administrator is not to squeeze out more than necessary.
Additionally, the time of payment, the manner of payment, the amount to be paid, the place of
payment as well as the rights and obligations under the tax laws must be known to both the Tax
Administrator and the taxpayers.
2.5.3 Convenience
A good tax system should be convenient for the government to administer and for the people to
pay. Perhaps the most important aspect of this canon is that taxpayers must not overly suffer in
46
order to comply with the tax laws. The method of collecting the tax should be such that the
majority of taxpayers would understand and routinely comply.
Moreover, taxpayers should undue time and/or incur under cost in complying with the law. In
short, tax must be allowed to go through cumbersome processes in the payment of their taxes
and much as possible. (Ali Nakyea Abdallah, Taxation in Ghana, Principles, Practice and
planning, Second Edition, 2008) (Internal Revenue Training material)
2.5.4 Economy
A good tax should be economical to the government. The administrative cost of collecting and
enforcing the tax should be reasonable in comparison with the total revenue generated by the
tax. Every tax ought to be so contrived as both to take and keep out of the pocket of the people
as little as possible over and above what it brings into the Consolidated Fund (Ali Nakyea
Abdallah, Taxation in Ghana, Principles, Practice and planning, Second Edition). Internal
Revenue Training School lecture material explains Economy as the cost of collection should
form only a small proportion of the amount to be collected or raised.
2.6.0 Strengths, Weaknesses, Opportunities and Threats Analysis (SWOT)
Any organization undertaking strategic planning will at some point assess its own strengths and
weaknesses. When combined with an inventory of opportunities and threats in the
organization‘s external environment, the organization is effectively making a SWOT analysis
that is; it is establishing its current position in light of its Strengths, Weaknesses, Opportunities
and Threats.
47
There are several ways of graphically representing the SWOT analysis matrix or grid.
While at first glance the SWOT looks like a simple model and easy to apply, experience shows
that to do a SWOT analysis that is both effective and meaningful requires time and a
significant resource. It requires a team effort and cannot be done effectively by only one
person. The SWOT methodology has the advantage of being used as a 'quick and dirty' tool or
a comprehensive management tool, and that one (the quick) can lead to the other (the
comprehensive). This flexibility is one of the factors that have contributed to its success.
The term ‗SWOT analysis‘ is in itself a curious term, for a SWOT is not an analysis in itself,
but a number of elements when used together form a valuable framework for analysis. It is
essentially a summary of a set of previous analyses – even if those were just 15 minutes of
mini-brainstorming with yourself in front of your computer although this approach is not
recommended! The analysis, or more correctly ‗interpretation‘, comes after the SWOT
summary has been produced (Jennifer Uhl, eHow Contributor, April 2, 2010).
2.6.1 Strengths
Strength is a resource, skill, or other advantage relative to competitors and the needs of the
market a firm serves. It is a distinctive competence that gives the firm a comparative advantage
in the market place (Lecture Notes on Strategic Management of Mr. E. Marfo Yiadom).
2.6.2 Weakness
A weakness is a limitation or deficiency in resource, skill, and capabilities that seriously
impedes a firm‘s effective performance. Facilities, financial, resources, management
48
capabilities, marketing skills, and brand image can be sources of weakness. (Lecture Notes on
Strategic Management of Mr. E. Marfo Yiadom)
2.6.3 Opportunities
An Opportunity is a favorable situation in the organizational environment, often a trend or
change of some kind or an overlooked need that supports the demand for a product or service
and permits the firm to enhance its position (Lecture Notes on Strategic Management by Mr. S.
A. Kyeremanteng).
It is therefore important that Administrators of VIT borrows this concept so as come out with
strategies that would effectively utilize the vast opportunities that VIT offers to the nation.
2.6.4 Threats
A threat is any unfavourable situation in the organization that is, potentially damaging to the
organization and its strategy. It may be a barrier, a constraint and an increased bargaining
power of key buyers‘, technological changes, or anything that might inflict problems damages,
or injury to the organization (Lecture Notes on Strategic Management of Mr. S. A.
Kyeremanteng).
An understanding of the organizations opportunities and threats helps its management to
identify realistic options from among which to choose an appropriate strategy and outlines the
most effective niche for the firm.
49
CHAPTER THREE
METHODOLOGY AND PROFILE OF STUDY ORGANIZATION
3.0 Introduction
This chapter is organized into two parts. The first section looks at the actual methodology. It
looks at the source of data, data analysis and presentation, sampling design and technique. The
second part considers the profile of the study organizations; thus the way each maximized
Vehicle Income Tax Revenue collection.
3.1. Population and Scope of study
The study was conducted on Internal Revenue Service and Identifiable Groups (GCU, GPRTU
& PROTOA) in Ashanti Region of Ghana, particularly those organizations within the Kumasi
Metropolis. Therefore for the purpose of this survey, the management of each of the study
organizations will contribute to the study population. Other members of the population
50
included the drivers under the identifiable groups and staff of Internal Revenue Service directly
involve in the administering of VIT.
3.2. Research Design
The descriptive sample survey was used for the study. This method is one of the techniques
under the study non-interventional study design. And it is the process of systematic collection
and presentation of data to present a clear view of a situation. This type of design was selected
to assist the research to appropriately describe some aspect of the study population by selecting
unbiased sample of individuals for the study.
Moreover, considering the objective of the study, the resources available as well as the target
population, it serves as the most appropriate and efficient technique that assisted the researcher
achieve the purpose of the study. Hence, other research designs, both interventional and non-
interventional could not have been more suitable or appropriate for the above method.
3.3 Sampling Procedures/ Techniques
The study was designed to draw respondents using both the probability and non-probability
sampling methods. Both non-random and random sampling techniques as well as the stratified
sampling were employed in this study. The use of the purposive sampling technique helps the
researcher to contact specific key informants of respondents in the research area of reference,
which is assessment of the Vehicle Income Tax under the study organizations.
In addition, the accidental/random sampling techniques also helped to solicit the views of
respondents- drivers/driver owners in the transport sector under the study who were available
51
at the time and place of data collection. Due to the nature and structure of the transport sector
where there is mixture of unionize drivers and ununionized, it was prudent to stratify these
organizations even the unionized groupings and non unionized while into smaller layers for
easy usage. As much as possible, the researcher tried to get a fair representation from different
classes of the target population. The Regional, four (4) District Managers, eight (8) core staff
of VIT from selected districts of IRS in the Kumasi Metropolis were interviewed.
Also four (4) Top Management members of GPRTU and PRTOA were interviewed. Two
hundred questionnaires were administered taken cognizance of unionized and ununionized
drivers. Respondents were further divided into taxies, trotro and others (big cars).
The Sample Size was determined with de Vaus (2oo2) formula below
𝑛 =𝑁
1 + 𝑁 𝑎 2
Where n = sample size, N = population universe and ―(a)‖ is the confidence level. The
formular adopted a confidence level of 93.3%, which is acceptable in Social Science research.
N = 2000, a = 6.7%
𝑛 =2000
1 + 2000 0.067 2
n = 200.4
n = 200
52
3.4 Data Collection Tools
3.4.1 Source of Data
The study used both primary and secondary sources of data. Primary data was obtained from
responses after administering both questionnaire and conducting interview with some selected
key information of samples of the target population.
Secondary data was obtained from varied source including the websites, leaflets, magazines,
and textbooks from the head offices of the Internal Revenue Service and GPRTU and
PROTOA.
More importantly, published literature and journals from the internet were reviewed to
obtained relevant information which helped in the research work.
The aim of the collection was to analyze the views of IRS and the Identifiable Groups‘
assessment of VIT and how each contributed effectively towards the maximization of revenue
generation.
3.4.2. Instrumentation and Data Collections
The instruments of data collection comprised both interviews and questionnaires. Interviews
conducted were not structured, with the staff of IRS in charge of VIT administration and
management of the transport organizations under the study. In each schedule however,
standard questions were put forward to ensure that the study organizations answer exactly the
same set of questions. Two types of questionnaires were designed separately for:
53
i. Drivers/driver owners of the transport to seek their assessments of both the transport
groups in charge of VIT and the Internal Revenue Service Administration of VIT.
ii. Drivers/owners for correct assessment purposes.
Questionnaire was used to induce a very high rate of responses from the respondents. And
they were sent and administered directly to respondents at their terminals or stations within the
Kumasi Metropolis and retrieved few days later. The exercise lasted for almost six weeks.
3.5 Data Analysis/Presentation
Qualitative and Quantitative techniques were used to analyze the data, and computer
programmes such as Excel and SPSS (Statistical Program for Social Sciences) were employed
to help in the analysis of the data obtained from the field.
In addition, charts were used as when and wherever appropriate in the presentation and
analysis of the data. Views expressed by respondents in questionnaire were edited, coded and
evaluated before it was processed in the form of quality analysis. The responses from the
internet were recorded and analyzed for the purpose of this work.
3.6 Researcher’s Limitations
Like any other study, limitations were expected; these included the fact that, the study focused
on only two (2) administrative districts of the Internal Revenue Service in Ashanti Region for
that matter Ghana. Also, of all the numerous stations/ terminals within Ashanti Region,
Kumasi Metropolis was taken. This was consciously done to give a fairly good sample. Due to
the sensitivity of the information required some incomplete data was registered. However, the
number of non respondents was few and did not significantly alter the outcome of the study.
54
3.7 Profile of Study Organization
One of the fastest yet untapped areas in revenue mobilization is the informal sector. Despite
current development in the transport sector where most of the drivers are unionized, they turn
to unions for advocacy for their rights. Most of the vehicle drivers belong to either GPRTU or
PROTOA.
There are others who may belong to neither of these groups. With democracy taking the center
stage in all sectors of the economy, quite a few or handful of vehicle drivers chose to be on
their own. They don‘t feel the impact of not belonging to a union because VIT administration
has been taken away from this Identifiable groups and vested into the hands of Internal
Revenue Service. Ironically, the identifiable groups saw VIT administration as a way to control
the transport system but IRS has always administered VIT not the same way as it has been
administering other taxes. It is therefore necessary to take a cursory look at these organizations
viz a viz their relation with VIT administration.
3.7.1 Internal Revenue Service
Internal Revenue Service (IRS) is under the Ministry of Finance and Economic Planning of the
Republic of Ghana. It is a public service organization charged with direct tax administration.
i. Mission
The mission of IRS is: To effectively and efficiently administer the tax laws through a well-
trained and motivated staff in order to maximize tax revenue.
55
ii. Vision
The vision of IRS is: To excel as an effective tax administration agency that applies the tax
laws fairly and efficiently and with integrity in order to maximize tax collection for National
development.
iii. Functions
The functions of IRS are as follows:
To administer the Tax Laws- Internal Revenue Act, 2000, (Act 592).
To assess delinquent tax payers to penalties and interest.
To collect taxes and penalties and interest and pay all monies collected into the
consolidated fund.
Other functions include:
Imposition of penalties for taxes in default.
Review of tax cases.
Refund of overpaid taxes.
Granting of individuals/persona relief where applicable.
Granting of tax incentives to business entities.
56
Issuance of Tax Clearance Certificate (TCC) to cover transactions where necessary.
3.7.2 GPRTU
GPRTU is a trade union movement affiliated to the Ghana Trade Union Congress with its
membership comprising of commercial drivers (professionals and non-professionals), porters
and trained union guards. There are two schools of thoughts as to when it was established.
Firstly, agitation to better due of drivers was in the year 1915 where drivers as alleged were
treated unfairly.
Another considered year was 1932 as also said by some drivers. But the accepted year for the
establishment was in 1932 under the Trade Union Congress (TUC) of Ghana but as an
independent body and being the Mother Union was established with the main ideas being:
For drivers to fight for their right
To be a voice of the professional drivers
Better conditions of service as far as the Transport business of the economy is
concerned.
It was estimated that the current membership of the Union in Ashanti Region is 45,000 with
bus and taxi drivers dominating.
57
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.0 General Introduction
Chapter four of this study was devoted to the data presentation and analysis of responses from
the Regional Director, District Managers and Staff of IRS; Top Management of Identifiable
groups and drivers. The statistical methods employed were descriptive such as charts, graphs,
tables and percentages. The statistical software for the analysis of the data was SPSS version
16.0 and Microsoft Excel.
4.1.0 Background Characteristics of Respondents
4.1.1. Gender of Respondents
Since the idea of this project was to assess the prospects and challenges of Vehicle Income Tax
in the Kumasi Metropolis and thus, commercial vehicle drivers/owners were taken into
consideration. All respondents were males.
58
4.1.2. Groupings of Drivers
Almost all the interviewed drivers were members of the Identifiable groups and that out of the
sampled categories, it was disclosed that 80% of the respondents had being with the union,
especially GPRTU, 15% being members of PROTOA and 5% been non-members of any
transport union.
4.1.3. Educational Background of Respondents
Apart from the Regional Director, the District Managers and Staff of IRS who were University
graduates, almost all the drivers from the Identifiable Groups that responded levels‘ of
education were up to the Senior Secondary School. However, the Public Relations Officers of
the Identifiable groups had tertiary education.
4.1.4. Districts/ Identifiable Groups Assessed
The assessment looked at data collected from two (2) districts in Ashanti Region, specifically
from the Kumasi Metropolis, which were Adum and Asokwa. The Ashanti Regional Director
of IRS, the District Managers of IRS from the two districts as well as two staff members each
from the districts was assessed. The Public Relations Officers from the Identifiable Groups
(GPRTU and PROTOA).Questionnaires were administered on drivers/vehicle owners who
were themselves drivers belonging to either a union or not. In all, 200 questionnaires were
administered which was organized based on the dominant categories of vehicle within the
Districts and Identifiable groups in the Kumasi Metropolis.
59
4.1.5. Age Characteristic
For this study, the Age cohort was divided into categories as shown in Table 4.1
Table 4.1 Ages of Respondents
AGE FREQUENCY PERCENTAGE
___________________________________________________________________________
20-29 years 12.8 6.4
30-39 years 20.4 10.2
40-49 years 125.0 62.5
50-59 years 33.6 16.8
60 years and above 8.2 4.1
___________________________________________________________________________
TOTAL 200 100
___________________________________________________________________________
Source: Author‘s Field Survey, December 2010
60
The ages of those within the first age group were 6.4%. Those within the second age group
were 10.2% as well as the third and fourth groups totaling 62.5% and 16.8% respectively
whiles the last age bracket constituted 4.1%. It can be said that, few of the respondents fall
within the first and last age categories, making up the non-working group in Ghana whiles
majority of the drivers were within the working groups who could work and pay their taxes to
enhance and maintain government revenue through VIT.
4.1.6 Number of Years
As far as the survey was concerned, the number of years respondents had been with their
respective unions were categorized as follows:
Table 4.2 Number of years Respondents have been commercial drivers
NUMBER OF YEARS FREQUENCY PERCENTAGE
___________________________________________________________________________
Under 5 years 10 5
Between 5-10 years 30 15
Between 10-20 years 40 20
20 years and above 120 60
___________________________________________________________________________
TOTAL 200 100
___________________________________________________________________________
Source: Author‘s Field Survey, December 2010
61
It was disclosed that from the survey that, 5% of the respondents had being members of their
unions for less than 5 years. Those who fell within this range were not taken into consideration
since they did not experience VIT in the hands of Identifiable Groups. Respondents who had
being members within 5-10 years and 10-20 years were 15% and 20% respectively. Majority of
the respondents which is 60% had being members of their union especially GPRTU being the
mother association among all transport unions for 20 years and above.
It was noticed that 85% of respondents had being members of GPRTU whiles 15% being
members of PROTOA and only 5% being members of other transport unions. Since greater
number of the respondents are unions members and had being with their respective unions for
some number of years, then, it can be said that they are aware of all contributions they must
make as far as VIT is concerned.
4.1.7 Vehicle Type
Table 4.3 Response on the number of vehicle type
VEHICLE FREQUENCY PERCENTAGE
___________________________________________________________________________
Taxi 124 62.0
Urvan ‗Trotro‘ 62 31.0
Others (Bus, Heavy Duty Cars, Etc) 14 7.0
___________________________________________________________________________
TOTAL 200 100
___________________________________________________________________________
Source: Author‘s Field Survey, December 2010
62
From the table above, it can be deduced that Taxis dominate the vehicle type in the Identifiable
groups with frequency of 62, followed by Urvans (Trotro) with frequency of 31 and the other
vehicle type (buses, heavy duty cars, etc) being the least in the Identifiable groups with
frequency of 7. The data gathered attested to the fact that Taxi is first and ‗Urvan/ Trotro’ are
the dominant vehicles in the Ashanti Kingdom.
4.2 Performance
4.2.1. Comparative Analysis of the Performance of the Identifiable Groups and IRS
Table 4.4 shows a comparative analysis of the performance over a period of time.
Table 4.4 Revenue Generated from 2000-2005
Year Total Tax Collection Increase over Previous Percentage
GH¢ Year’s Collection GH¢ Increase (%)
___________________________________________________________________________
2000 660218.1
2001 780173.3 119955.2 18.2
2002 922125.9 141952.6 18.20
2003 3010278.4 2088152.5 226.40
2004 4308878.8 1298600.4 43.10
2005 6143316.5 1834437.7 42.60
2006 10315990.5 4172674.0 67.90
___________________________________________________________________________
Source: Internal Revenue Training School 2010
63
It is clear from the above Table that the introduction of the VIT Stickers in 2003 greatly
enhanced collection of taxes from self-employed Transport Operators. From 2000 to 2002,
there was a consistent percentage increase over the previous year‘s collection of 18.2%. It was
noted that the Identifiable Groups were in charge of the collection of VIT then known as
Transport Tax. However, in April 2003 when the VIT Stickers were introduced and the agency
role abolished, Internal Revenue Service which was mandated to collect VIT made a 226.40%
increase over the previous year‘s collection. From the, IRS has maintained the revenue
generated by collecting 43.10%, 42.60% and 67.90% over the previous years of 2004, 2005
and 2006 years of assessment respectively. As reviewed, collection of Transport Tax was
initially classified into two categories of payments:
Weekly tax payment for Taxies and cars on hire within town; ‗Trotro‘ vehicles and
light dry cargo service (market service).
Fare per trip tax payment for ‗One pound one pound‘ cars, mini buses, long distance
passenger buses, container trade in Accra-Tema, long distance cargo trucks and
articulated vehicles, wet cargo vehicles including water tanks and Tipper trucks.
(Internal Revenue Training School)
In May 2003, the weekly collection and the daily collection of taxes by transport owners
were changed to quarterly installment to be paid on or before the first day of January,
April, July and October of each year‘s assessment. Payment of tax was made through the
purchase of a sticker issued by the commissioner from any office of the Internal Revenue
Service.
However, recognized transport associations recognized by the commissioner of IRS, were
permitted to purchase the stickers for their members. A tax paid under did not in any way
64
relieve taxpayers (owners of vehicle) from filling a return of income as stipulated by
Internal Revenue Act 2000, (ACT 592). The VIT so paid becomes tax credit to the person.
Source: Internal Revenue (Amendment) Regulations 2003, LI 1727
It is a fact that Internal Revenue Service has done tremendously well as compared to the
Identifiable Groups by recording 226.40% over the previous year‘s of 18.2%.
4.2.2 Drivers’ Rating of both Identifiable Groups and IRS
Table 4.5 outlines the responses on the performance of VIT.
Table 4.5 Responses on the Performance of VIT in the Hands of the Identifiable
Groups
PERFORMANCE FREQUENCY PERCENTAGE (%)
Very Good
Good
Average
Poor
18
42
126
14
9.0
21.0
63.0
7.0
TOTAL 200 100
Source: Author‘s Field Survey, December 2010
From Table 4.5, 9% of the respondents said the Identifiable groups did very good when VIT
was in there hands whiles 21% and 7% agreed that they were good and poor in the upgrading
of the VIT respectively. Among the performance, it was found out that, 63% agreed to the fact
that the Identifiable groups were not the best. Based on Table4.5, it could be said that there had
been flaws and lapses when VIT was in the hands of the Identifiable groups.
65
It must be noted that the initial experimentation of the associated tax was successful and I even
led to its expansion to other informal sectors. (Joshi and Aryee 2006b). However, the amounts
collected (especially in the early years) were small relative to the total revenue of the IRS
(Joshi and Aryee 2006b).
4.2.3. Responses on the Performance of VIT in the Hands of IRS
Table 4.6 Responses on the Performance of VIT in the Hands of IRS
PERFORMANCE FREQUENCY PERCENTAGE (%)
Very Good
Good
Average
Poor
38
94
42
26
19
47
21
13
TOTAL 200 100
Source: Author‘s Field Survey, December 2010
Looking at the performance of IRS, it was noticed that drivers like the idea of VIT being in the
hands of the IRS. From Table 4.6 (ii) above, it can be seen that, the performance of IRS is good
with 47% while 19% attested to the fact that IRS is doing very well in the collection of VIT. At
least, there are 21% and 13% being average and poor performances as far as collection of VIT
is concerned in the hands of IRS.
66
From the above Tables (4.5 and 4.6), the drivers rated their unions ‗average‘ by 63% and also
rated IRS ‗good‘ by 47%. It can therefore be concluded that, majority of the drivers saw
Internal Revenue Service better than their Unions in the administration and management of
VIT. Generally, there was a big gap between 63% and 47% as ‗average‘ and ‗good‘
respectively.
4.2.4. Monitoring of Transportation Income (VIT) - Identifiable Groups
Monitoring of Transportation Tax/VIT in the hands of the Identifiable Groups was done by the
Police personnel from the Identifiable Groups and IRS. However, monitoring was mostly done
by the personnel from the Identifiable Groups. From the questionnaire administered, drivers
were of the opinion that members belonging to management of the Unions were favored. Also,
drivers outside the Unions were not paying Transportation Income. Below is a table to show
how the monitoring was done.
Table 4.7 Response of Drivers on Monitoring of VIT by the Identifiable Groups
RESPONSE FREQUENCY PERCENTAGE
Yes 40 20.0
No 160 80.0
TOTAL 200 100.0
Source: Author‘s Field Survey, December 2010
67
From table 4.7, 80% of the respondents (drivers) argued that though there were monitoring
Teams to check on their payments, it was not properly done and that they were biased. Due to
the fact that the monitoring was mostly left in the hands of personnel from the Identifiable
Groups. Only 20% favored the Identifiable Groups.
Table 4.8 Response of Drivers on Monitoring of VIT by Internal Revenue Service
RESPONSE FREQUENCY PERCENTAGE
Yes 120 60.0
No 80 40.0
TOTAL 200 100.0
Source: Author‘s Field Survey, December 2010
From Table 4.8, 60% of the respondents agreed to the form of monitoring done by IRS as
against 40% of the respondents. Comparatively, majority of the respondents agreed to the
monitoring by personnel from IRS and the Identifiable Groups. Suddenly, 98% of the drivers
emphasized that they had never seen officials of IRS doing a joint monitoring of VITS with the
Police.
Monitoring of Transportation Income was done jointly by the Police and personnel from the
Identifiable Groups and based on the questionnaires administered; drivers were of the view that
VIT in the hands of the Identifiable groups was not properly handled due to the flaws and
lapses addressed earlier. However, drivers think IRS is doing well as far as monitoring is
68
concerned. They were of the view that all drivers; being a union member or not were made to
pay VIT.
So it could be said that there were no favoritism on the part of IRS as far as Transportation
Income was concerned. The drivers however called for intensive sensitization for the Ghana
Police Service as to the date of default of VIT (on/before the 15th
day of the various Months in
which VIT was paid). This was emphasized by the Commissioner of IRS, when he called on
the Ghana Police Service to arrest defaulters and prosecute them to serve as deterrent to others
(Revenues 2007).
4.2.5 Measures Implemented to control Revenue Leakage
The following measures were put in place to ensure that all revenue generated is accounted for
on timely basis;
a. Executive members of the Identifiable Groups were given the responsibility of
controlling the VIT booklets. IRS dealt only with the executive of the Identifiable
Groups.
b. Payment of revenue collected was checked with the counterfoil of the receipt books.
c. Periodic monitoring was done by IRS District offices in catchment areas.
d. Internal Audit Section of IRS periodically audited the receipt books to control the
system.
In spite of these measures the following existed:
69
1. There was a problem of accounting for VIT revenue. This was seen from the areas of
embezzlement of funds, late payment of monies collected (This gave the Identifiable
groups temporal/short term funding).
2. There were malpractices in the system. Some included:
The unions issuing out their own receipts. (This was confirmed by the IRS
Internal Audit Division and terms at various districts nationwide)
Under declaring of VIT revenue by writing the right amount on the receipt to
drivers and different thing on the duplicate copy to IRS. This was done by
manipulating the carbon used for duplication.
Some of the unions were applying wrong rates to commercial vehicles.
3. Non-unionized drivers escaped the payment of tax. This was because the Identifiable
groups were not prepared to sell the Stickers to them and they themselves were
reluctant to purchase the stickers.
4.2.6 Controls implemented by the IRS
The following measures were put in place to ensure that all revenue generated is accounted for
on timely basis;
1. Periodic audit.
2. Stock control system is in place right from the headquarters to the region through to the
various districts in Ghana.
3. A responsible senior officer is put in charge of VIT.
4. VIT stickers are accounted for verification at the district and regional levels.
70
5. Internal Audit conduct audit to ensure that the system is being followed and
recommendations made to augment the internal control system.
6. Other strategic organizations like Audit Service and External Audit Agencies undertake
periodic audit.
Despite the above measures, there existed loopholes in the administration of VIT in the hands
of IRS. There were loss of Sticker booklets, wrong rates were being paid by drivers and
improper accounting of VITS sold.
Comparatively, Internal Revenue Service had better controls relative to that of the Identifiable
Groups because of other strategic agencies like the Audit Service and external audit bodies.
4.3 Comparison of Measures to Minimize Revenue Leakages of VIT both in the hands
of the Identifiable Groups and IRS
Both the IRS and the Identifiable Groups were left on their own to ensure that revenues
collected were accounted for on time. There were loopholes in the way both institutions
monitored and controlled VIT. Whiles that of IRS could be said to be quite better than that of
the Identifiable Groups in terms of having external independent bodies other than their own
internal audit division, the Identifiable Groups had no audit body on their own to conduct such
periodic audits. Both systems remain static until people started raising questions about the way
VIT was handled. There were no plans or programmes in place to test the efficacy of the VITS
system from time to time. No standards or targets were set to be attained. All that the nation
71
was interested in was the increment in monies generated and not the effectiveness and
efficiency the system.
4.4 Mode of Payment
Table 4.9 Response on the Number of times Stickers were bought in a year
NUMBER OF TIMES FREQUENCY PERCENTAGE
Once 42 21.0
Twice 50 25.0
Trice 32 16.0
Four times 76 38.0
TOTAL 200 100.0
Source: Author‘s Field Survey, December 2010
72
From Table 4.9, it was seen that, number of people who buy stickers once a year constitute
21%, number of people who buy stickers twice a year are 25% whiles 16% buy stickers trice a
year. The number of people who buy stickers four times a year outnumber the other times
representing 38%. Though, most drivers buy VIT stickers at the right time, yet 62% of drivers
fail to buy stickers ay the right time which is four times a year.
The main reasons why this is happening is that;
Drivers argued that they spend much time in order to buy stickers
They also argued that it‘s unnecessary to buy stickers since IRS officials are not keen in
monitoring VIT stickers.
4.4.1 Responses on Maintaining the Mode of Payment
Source: Author‘s Field Survey December 2010
0
20
40
60
80
YES NO
68.3
31.7
RESPONSE
PER
CEN
TAG
E (%)
Fig 4.1 Response of Maintaining the Mode of Payment
73
According to the response from figure 4.2, 68.3% agree that the mode of payment which is on
quarterly basis should be maintained. The underlining idea is that the quarterly payment is very
helpful in the sense that the amount paid is moderate and if possible be maintained alongside
the time frame for payment. The remaining 31.7% did not agree to the notion of maintaining
the mode of payment which they based their argument on the lapses created, which include,
time consuming, and decrease in productivity that is with regards to the working hours, among
others.
4.5 Response on VIT being given back to the Identifiable Groups or maintained to
IRS
With regards to the perception on the performances of VIT collection in the hands of either the
Identifiable groups or the IRS, it was clear that, the Identifiable groups did not do well in the
collection of VIT as compared to IRS. Because of this, 68% of the respondents attested to the
fact that VIT collection in the hands of IRS should be maintained while 32% said VIT
collection should be given to the Identifiable groups.
74
4.6 The contribution of GPRTU
GPRTU appeared to be an agency that contributed significantly to the collection effort of the
Identifiable groups and they continued to enjoy the agency role even after the agreement
between IRS and most of the occupational groups had been abrogated. However, research
conducted by the Internal Revenue Service indicated that there were lots of malpractices and
tax leakages in the operations of the GPRTU and the other transport unions.
(Internal Revenue Training School Material).The IRS therefore abrogated the agency
agreement with all the road transport organizations and introduced the VITS by means of
Internal Revenue Regulations, LI 1727 of 2003.
Apart from these there were other lapses such as:
A significant number of drivers were exempted from paying and even if they did, it was
delayed.
68% YES
32% NO
Source: Author‘s Field Survey,December 2010
Fig. 4.2 Response on whether to Maintain VIT in the Hands of the
IRS
75
Some drivers were also favored in the sense that they were friends of the union
Chairmen.
The Public Relations Officers of GPRTU and PROTOA interviewed said some officials
at the union offices connived with some IRS officials to make illegal payments where
counterfeit receipts were printed.
Though there were lapses when VIT was in the hands of the Identifiable groups, at least to
some extent they did well in the collection as confirmed by some drivers and Union Chairmen.
Some of the lapses identified with the IRS were:
Decline in productivity, this is so because currently, drivers queue and spend much time
at IRS offices to obtain VIT stickers.
Drivers could pay as and when they wanted unlike this era that payment must be made
within the time frame is of 14/15 days of the quarter in which VIT is collected.
4.7 Proper Assessment of Transport Operators
Table 4.10 Perception on the filing of Returns under both Identifiable Groups and IRS
NUMBER OF TIMES FREQUENCY PERCENTAGE
Yes 0 0
No 200 100
76
TOTAL 200 100.0
Source: Author‘s Field Survey, December 2010
The Table 4.10, 100% of drivers had never filed returns before under both the Identifiable
Groups and IRS. Most drivers view VIT as a final tax and not as a tax on account. It is
therefore envisaged that IRS as an administrator and manager of VIT would put in place
measures to address the issue of non-filing of returns of operators in the transport sector.
4.8.0 Tenets of Good Tax System
4.8.1 Certainty
Fig 4.3 Perception on Certainty
77
Source: Author‘s Field Survey December 2010
From Figure 4.3, only a hand full of drivers were not aware of when they were to make VIT
payments in the year. Only 1.5% and 1% said they made payments on monthly and annual
bases respectively as well as 5% were aware of half a year. It can be concluded that almost all
drivers interviewed knew the actual time and month they were suppose to pay VIT. Ninety five
percent (92.5%) of the respondents attested to it. Based on the huge number of drivers who are
certain of when to make VIT payment then, it can be recommended that any defaulter should
be made to face the consequences because they have no excuse.
VIT as measured by the respondents fulfils what Ali Nakyea (2008) stated as a requirement to
attain Certainty in Taxation. The rate of VIT had always been known by drivers.
4.8.2 Convenience
Fig 4.4 Perception on Convenience
1%
93%
1%
5%
Annually
Quarterly
Monthly
Half Year
78
Source: Author‘s Field Survey December 2010
From the Figure 4.4, 93.5% of respondents said payment of VIT stickers was very convenient
because they could buy and pay VITS at any IRS office nationwide; whiles 6.5% thought
otherwise. The purchase of VIT stickers was very convenient to drivers. However, respondents
did not overlook the much time they spent at the IRS offices during peak times to obtain VITS.
4.8.3 Response on Easiness of Respondents
Fig 4.5 Response on Easiness of Respondents
Yes93%
No7%
79
Source: Author‘s Field Survey December 2010
It can be seen from the Figure 4.5 that, almost all the respondents which is 97% said they
found it very difficult and for that matter struggle to pay VIT at the various IRS offices.
Three percent (3%) of the respondents who said otherwise based their argument on the fact
that, they make the payments VIT on time. Staff in charge of VIT also complained about the
fact that transport operators wait till the last day (15th
day of the quarter) to purchase VIT.
4.8.4 Economy
Fig. 4.6 Perception on the increase of VIT by Government
YES97%
NO3%
80
Source: Author‘s Field Survey December 2010
Many people responded negatively when asked if VIT could be increased. They based their
argument on the fact that increase in taxes affects all spheres of the economy and that could be
inferred from the Figure 4.6; that drivers (respondents) did not want to hear an increase in taxes
as far VIT is concerned; 93% responded that VIT should not be increased whiles only 7%
agreed that it would be very necessary if VIT is increased because the amount paid is very
moderate and has being so for many years now. Their main idea was that government revenue
accrued from VIT collection would be raised.
Respondents refuted the claims that the VIT payment only represented the cost of the VITS
and that they were also contributing meaningfully to the running of the Ghanaian economy.
4.8.5 Respondents knowledge on Equity
NO 93%
YES 7%
81
Fig 4.7 Perception on Equity of VIT
Source: Author‘s Field Survey December 2010
As far as equity is concerned, there was fairness in the payment of VIT since payment is
proportional to vehicle type. With this, frequency of 183 being 91% agreeing to the rate and
categories of the VIT payment that rates paid are very moderate with respect to their vehicle
types while 9% disputed that fact. . VIT can be said to achieve both vertical and horizontal
equity (Lecture notes of F E K Akoto).
4.9 SWOT of VIT
Table 4.11 SWOT of VIT
NO9%
YES91%
82
Strengths Weakness Opportunities Threats
It has brought on The real taxpayer VIT from heavy vehicles Pressure
board commercial is not known will increase due to the groups
drivers in the discovery of oil in
informal sector commercial quantities.
Accountability of Improper classification More businessmen/ Political
VIT is high relative of vehicles women are entering parties
to when it was into the transport inter-
being administered sector making it easy ference
by the Identifiable for proper assessment
Groups. and correct taxes to
be paid relative to more
individuals
Coverage of VIT Individual drivers Automation will
has increased to do not file returns increase VIT
include both union collections.
and non-union
members
It has reduced Late arrival of GRA would increase
the natural rivalry VIT Stickers collection of VIT
among transport since booth IRS
groupings and Customs will
do the monitoring.
__________________________________________________________________________
Source: Author‘s Field Survey. December 2010
4.10 Reasons why VIT was taken from the Identifiable Groups
83
i. There was a problem of accounting for VIT revenue. This was seen from the areas of
embezzlement of funds, delay in the payment of monies collected. This particularly
gave the Identifiable groups temporal/short term funding.
ii. There were malpractices in the system. Some included:
The unions issuing out their own receipts.
(This was confirmed by the IRS Internal Audit Division and officers at various
districts nationwide)
Under declaring of VIT revenue by writing the right amount on the receipt to
drivers and different thing on the duplicate copy to IRS. This was done by
manipulating the carbon used for duplication. There were different figures on
the receipts and the counterfoil.
Some of the unions were applying wrong rates to commercial vehicles.
iii. Non-unionized drivers escaped the payment of taxes. This was because the Identifiable
groups were not prepared to sell the Stickers to them and they were also reluctant to
purchase the stickers.
iv. There was the issue of natural rivalry among the Identifiable groups. In-fighting was
predominant during that era ( the period that the Identifiable Groups administered VIT).
Each of the Identifiable groups wanted dominance and this created tension. Besides,
there was the issue of commissions; more collections meant more commission this also
intensified unhealthy competition. The commissions earned were major source of
revenues to the various unions.
4.12 Response on SSNIT Contribution by Drivers
RESPONSE FREQUENCY PERCENTAGE
84
YES 10 5
NO 190 95
TOTAL 200 100
Source: Author‘s Field Survey, December 2010
From Table 4.12, it was noticed that most drivers were not contributing to SSNIT. They argue
that only salary workers were to contribute to SSNIT. That explained why 95% of the
respondents were not SSINT contributors. Out of the sampled responses, 5% SNIT were
contributors.
85
CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATIONS’ AND CONCLUSIONS
5.0 Introduction
This Chapter gives a summary of findings, recommendations and conclusions about improving
VIT collection base study on the study conducted on the stakeholders of VIT in the Kumasi
Metropolis.
5.1 Summary of Findings
The study revealed that the administration of VIT under both IRS and Identifiable Groups were
not without challenges. Since it is quite difficult getting the informal sector to pay taxes and
VIT is one measure to widen the tax net so far as that sector was concerned. Below is a
summary of challenges facing the management and administration of VIT:
5.2.0 Challenges of Managing and Administering VIT
5.2.1 The limited Coverage of VIT
An important point for taken the VIT from the Identifiable Groups was that most drivers who
did not belong to any of the unions or groups were automatically excluded from the payment
of VIT. This is because none of the unions was prepared to sell the stickers to them. It was
deemed a privilege to belong to a union. With IRS managing of VIT some of the problem has
been solved. Drivers in most villages and obscure routes avoid the payment of VIT because
86
they are hidden from the Police and cost involved to pursue such people is more in terms of
logistics and staff is enormous.
5.2.2 Delays in Arrival and Shortage of VIT Stickers
This is one major setback of VIT sticker system. Both officials of IRS and management of the
Identifiable Groups come out strongly on this issue. There are undue delays of stickers from
the IRS head office. This only attest to the reason why most drivers wait till the last day or the
deadline to purchase VIT since the usual unavailability of stickers would be starring at them.
Additionally, there is shortage of certain category of stickers. It is time that the districts of IRS
are assessed so that dominant types of VIT would be sent to the districts to avoid the
unnecessary shortages that beset the smooth administration of VIT.
5.2.3 Ineffective Monitoring of VITS on the part of IRS and the Ghana Police Service
Monitoring is commonly seen at certain times of the year; thus the months in which VIT are
collected. Monitoring now is relatively better to that of the Identifiable Groups which used
their own people to enforce collection. This means that GPRTU could not VIT enforced VIT
so far as a driver from PROATOA was concerned. The police are responsible for both the
unions and the non unions. One problem with the collaboration between IRS and the police is
that, both conduct their monitoring activities independent of each other. Whiles the police do
monitoring on the normal road checks; that of IRS is done in their own premises when
transport owners come to purchase VIT. Respondents asserted that joint monitoring of VITS
by the Internal Revenue Service and the Ghana Police was the best. However joint monitoring
87
is scarcely done. The police are handicapped when it comes to the correct application of the
Tax Laws. Often they arrest drivers who don‘t know their rights. Even if the police make
arrest, they settle the issue their own way. One management member of IRS explained that he
had never seen the police prosecuting a driver for non -payment of VIT.
5.2.4 The Inefficient Mode of Payment of VIT
The normal process is for the driver to visit any office of IRS to purchase VIT. This process
put impediments on commercial vehicle drivers since they had to go through a lot of things
before obtaining the VITS. Firstly, they have to find a good place of parking space for their
vehicles. Where bigger commercial vehicles drivers pack their vehicles is no business of IRS.
Apart from this, no matter the time one visit IRS, that person would have to wait till 8:00 when
normal day‘s activities start before one is attended to. On the payment itself, one or at most two
cashiers would serve over 400 commercial drivers a day. This trend automatically leads to long
queues at the various offices. This is worsening by unavailability of parking space for
commercial drivers.
5.2.5 The negative effect of the static VIT rates
One thing that the management of IRS could not hide but came up strong on it was the fact
VIT rates have remained static since 2005 that the last amendment was made. They were of the
opinion that the rate should have been reviewed at least 2 times. They therefore see this as a
major weakness in the management of VIT. They asserted that the static nature of the VIT rates
does not reflect the realities on the ground and it negatively affects revenue.
88
5.2.6 Lack of Cooperation on the part of Identifiable Groups
The relationship between IRS and the various Unions had not been the best. Both claimed
apathy on each other so far as administration and management of VIT is concerned. The
Unions felt sidelined when the government was formulating policies on transportation tax.
They argued that, the government took away VIT from them without going through the proper
procedure. This arguably has created tension between the various transport groups and IRS. To
sum it all, lack of cooperation on the part of the Identifiable groups has affected the smooth
running of VIT administration.
5.2.7 Low level of VIT Awareness among Non Governmental Organizations and
Educational Institutions.
There is a problem when it came to these institutions patronizing VIT stickers. They stated
categorically that they were exempted from the payment of VIT. This was due to the low level
of education on their part. It is envisaged that public education would be intensify to arrest
any misconceptions about who pays and who does not pay VIT.
5.3.0 Prospects of VIT
Despite the numerous challenges facing VIT management, it has chopped some successes
which need to be mentioned.
89
5.3.1 The widening of the tax net to include all commercial transport operators.
It has widened the tax net to include transport operators who either avoided or evaded tax. IRS
has played an important role of bringing both unionized and non unionized drivers into the tax
net. IRS has also reduced if not eliminated the fierce rivalry that existed among the various
transport unions.
5.3.2 The viability of the Transport Sector.
It has been proven that more businessmen and businesswomen are taken advantage of the vast
opportunities that the Transport Sector offers to operate. It is evidenced by the increase road
networks, construction of new roads and rehabilitation of old roads. Urbanization has also
necessitated the need for more commercial transport operators to exploit the vast that it offers.
5.3.3 Increase in the number of Commercial Vehicles on the road
There has been a phenomenal increase of vehicular traffic on many roads in the country. Many
reasons have been assigned for this phenomenal growth. The increase of foreign heavy loaded
trucks on the roads is a clear example. With the violence at the surrounding neighboring
nations, most their trucks patronizes Tema and Tarkoradi harbors for their import. This offered
the nation the opportunity to cash in on them.
90
5.3.4 The positive impact of Automation
This offers an attractive incentive to IRS to improve revenue from VIT. With introduction of
automation in the management and administration of VIT, processes would be simplified to
reduce the time that drivers spend at IRS offices to obtain VIT. Additionally IRS offices
nationwide could be in a better position to keep database of all vehicles within their
jurisdiction. With the automation, most human errors (deliberate or not) would be reduced to
the minimum. Finally, with automation few staff would be needed to attend to drivers leaving
IRS with additional staff to concentrate on other core activities.
5.3.5 The Discovery of Fuel in Commercial Quantities
The benefit of this cannot be overlooked. Every sector of the economy would benefit from the
economic advantage that it offers. The effect from this development among other things would
increase VIT since more trucks and for that matter vehicles would be needed in its extraction,
and transportation. In addition more towns would be opened up for commercial transport,
obviously, VIT revenue would improve.
5.3.6 Integration of the three Revenue Agencies
With the integration of Internal Revenue Service (IRS), Value Added Tax Service (VATS),
and Customs Excise and Protection Service (CEPS) in to Ghana Revenue, VIT would
automatically increase tremendously. One measure that GRA would adopt is the classification
of all taxpayers (clients) in to three categories under for proper administration and management
of taxes. With this development, VIT would be placed in a category that would ensure that the
91
nation derives the best from it. GRA would definitely be beneficial to VIT in its administration
and management.
5.4.0 Recommendations for Effective VIT Administration and Management
Following the Challenges, complaints and problems discovered, the following
recommendations have been outlined and it is believed that if consideration is given and action
is taken on these, it would go a long way to enhance the prospects and ensure improved VIT
collection in the years to come.
5.4.1 Internal Revenue Service should be adequately resourced
IRS should be resourced to administer VIT effectively and efficiently. The service should be
given the needed logistics to work. If this is done, drivers who evade the payment of VIT be
identified and made to pay.
5.4.2 Timely arrival of Vehicle Income Tax Stickers (VITS)
The management of IRS should come out with measures to deal decisively with the issue of
shortage and late arrival of VIT stickers to various IRS offices nationwide. Timely arrival of
VIT stickers would repose confidence the in VIT system and increase collection.
92
5.4.3 Effective joint morning with the Police
The Management of IRS to team up with the Ghana Police Service for effective monitoring of
VIT to ensure maximum compliance on the part of transport operators. These collaborations
could be joint workshops, training of the police personnel on VIT, equipping the police with
relevant sections of IRS Acts and Regulations etc to enable the police act professionally with
the commercial transport operators.
5.4.4 There should be improvement in the Mode of Payment of VIT
The Management should as a matter of urgency improves the mode of payment to save
commercial drivers from the tussles they go through to purchase VITS. This can be done by
setting up satellite payment centers at some selected stations and VEILD. Some people are also
routing for VIT to be ceded to VEILD to serve as one off transaction to commercial drivers.
Some are also of the opinion that commercial drivers should be given the options to buy the
VIT stickers quarterly or annually.
5.4.5 There should be regular revision of VIT Rates
The Management should push for upward revision of that the rate of VIT to reflect economic
reality. Revision of VIT should cut across all areas of the transport industry.
93
5.4.6 There should be improved collaboration between the IRS and the Identifiable Groups
There should be effective collaboration between the managements of IRS and the Identifiable
Groups. This will remove the indifferent of the Unions towards VIT administration.
5.4.7 Management of IRS should intensify Public Education
Management of IRS should vigorously embark on public education to ensure increase
awareness. They should use the appropriate mediums/ channels to effectively communicate to
the intended audience.
5.4.8 Proper utilization of the prospects to improve VIT collections.
IRS needs to work on its self to maximize the prospects that are available. Conscious effort
should be exerted to reap the benefit that lies ahead.
5.4.9 There should be Conscientious effort from all stakeholders to ensure improvements in
revenue mobilization
Finally, the general public, commercial transport operators should all join hands to ensure that
the nation derives the most from VIT.
94
5.5 Conclusion
‗A problem identified is half solved‘ The Challenges and prospects of VIT has been identified,
analyzed and a number of recommendations made. If they are to be implemented, Ghana
would increase its tax revenue thereby reducing its reliance on donor supports, and internal and
external borrowings to support it development agenda. Taxation of the Informal Sector poses
great challenge to even countries, but the culture of paying tax irrespective of one‘s‘
occupation is emphasized.
It is hope that attention would not only be to widen the tax net but to monitor and improve the
existing measures to maximize national revenue. Also revenue generated should be well
accounted for and utilized to forestall public confidence and voluntary compliance.
It must be borne in mind that: there is no direct relationship between the exaction of revenue
and any benefits to be received by taxpayers, Taxes are not only levied on the basics of
predetermined criteria, Taxes are not levied on recurring or predictable bases. Taxes may be
distinguished from regulations or penalties. (Pratt, William N. Kulsrub, 2000). Taxation of the
Informal Sector poses a great challenge to both policy makers and management\administrators
in every economy. Excuses and hindrances need to be addressed in other to get voluntary
compliance from the informal Sector.
It is hoped that the findings and recommendations would go a long way to improve revenue
collections. It is also hoped that this research work would propel informed discussions on other
areas of taxation so that quality policies and strategies would be implemented to ensure
sustained tax collections.
95
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Gerxhani and Klarita (2003): The Informal Sector in Developing and Less Developed
Countries: A Literature Survey. Public Choice, forthcoming.
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Ghana for the 2006 Financial Year, presented to Parliament on Thursday, 10th
November 2005
by Kwadwo Baah-Wiredu, M.P., Minister of Finance and Economic Planning (Accra:
Assembly Press, Ghana Publishing Corporation).
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GNCCI (2008). Tax Reforms for Business Growth. Accra: Ghana National Chamber of
Commerce and Industry.
Gyasi, K. (2005). Management Accounting ‗The Invaluable Guide for the Trainee
Management Accountant‘
Hart, K. (1973), Informal Income Opportunities and Urban Employment in Ghana‖, Journal of
Modern Africa Studies 11/I: 61-89.
Iain Gray and Stuart Manson. Third Edition The Audit Process, Principles, Practice and Cases
Internal Revenue Act 2000 (Act 592)
Internal Revenue Act 2000, Act 592, Sections 7, 8 and 9
Internal Revenue Regulation, LI 1727 of 2003.
Internal Revenue Regulations L.I. 1698 – 2002
Internal Revenue Regulations L.I. 1803 2004
Internal Revenue Service Training Department learning material
IRS Hand Book-IRS 04
IRS Training School Lecture Notes on Public Finance
IRS Training School Manual
ISSER, 2003
Joshi, Anu and Ayee, J. (2002) Taxing for the State? Politics, Revenue and the Informal Sector
in Ghana. Institute of Development Studies (IDS) Bulletin, (Vol. 33, No. 3), pp. 90-97.
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Joshi, Anu and Ayee, Joseph (2006a). Associational Taxation: A Pathway into the Informal
Sector? in Deborah Brautigam, Odd-Helge Fjeldstad and Mick Moore (eds.) Capacity and
Consent: Taxation and State-Building in Developing Countries (Cambridge: Cambridge
University Press), forthcoming.
Joshi, Anu and Ayee, Joseph (2006b) ―Autonomy and Organization?: Reforms in the Ghanaian
Internal Revenue Service‖, Public Administration and Development, forthcoming.
Lecture notes of F.E.K. Akoto
Lecture Notes on Strategic Jennifer Uhl, eHow Contributor, April 2, 2010
Lecture Notes on Strategic Management by Mr. S. A Kyeremanteng
Lecture Notes on Strategic Management of Mr. E. Marfo Yiadom
Mr. Justice Wendell Holmes (a famous American Judge)
Nakyea, A. Second Edition Principles, Practice and Planning
National Revenue Secretariat (NRS)
Nsor-Ambala, R. (2008), A Reference Book for Taxation in Ghana.
PNDCL 143 of 1986
PNDCL 144 of 1986
RAGB Strategic Plan (2010-2012) issued in March 2009
Retention of Part of Revenue Act of 2002 (Act 628)
Revenews (2007), House Journal Of Internal Revenue Service No. 17
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Revenue Agencies Governing Board (RAGB) Act of 1998 (Act 558)
Revenue Agency Governing Board – RAGB
Salmon, W. V. (19TC 174).
Sauders, M. Lewis, P and Thornhill A (2005), Research Methods for Business Students, 3rd
edition, Harlow: FT Prentice Hall.
Schneider, Freindrich and Robert Klinglmair (2004). Shadow Economies Around the World:
What Do We Know? In CESifo Working Paper Series 1167. Munich: CESifo
Smith A. (1776). The Wealth of Nations
Smith, P. (1994), Assessing the size of the Underground Economy: The Canadian Statistical
Perspectives, Canadian Economic Observer, Cat. No. 11-010.
Stella, Peter (1993) ―Tax Farming: A Radical Solution for Developing Country Tax Problems‖
IMF Staff Papers Vol. 40, No. 1(March), pp. 217-225.
Steven L. Slavin, Microeconomics, Sixth Edition
Terkper, S.E. (2003). Managing Small and Medium-Size Taxpayers in Developing
Economies. Tax Notes International, January 13.
The 2009 budget statement and economic policy of the government of Ghana.
Value Added Tax Act, 1998 (Act 546) and the Value Added Tax Regulations, 1998.
Whittington .Pany Fourteenth Edition, Principles of Auditing and other Assurance Services,
99
Zee, Howell.( 2005). Personal Income Tax Reform: Concept, Issues and Comparative Country
Development IMF Working Paper 05(87). Washinton DC: International Monetary Fund.
100
APENDICES
APPENDIX A
INTERNAL REVENUE (AMENDMENT) REGULATIONS 2001
Owner of Rate of Tax (GH¢)
1. Taxi and cars on hire within town 0.20per week
2. ―Trotro‖ vehicles 19 seats and less 0.20 per week
3. ―Trotro‖ vehicles 20 to 34 seats 0.30 per week
4. ―Trotro‖ vehicles 34 seats and more 0.40 per week
5. Light dry cargo services (market service) 0.30 per week
6. ―One pound one pound ― cars 0.005 per 0.10 fare per trip
7. Mini buses other than ―trotro‖ 0.005 per 0.10 fare per trip
8. Long distance passenger buses 0.005 per 0.10 fare per trip
9. Container trucks in Accra- Tema 0.005 per 0.10 charger per trip
10. Long distance cargo trucks and articulated
vehicles
0.005 per 0.10 charger per trip
11. Wet cargo vehicles including water tankers 0.005 per 0.10 charger per trip
12. Tipper trucks 0.005 per 0.10 charger per trip
101
INTERNAL REVENUE (AMENDMENT) REGULATION, 2002
Owner of Rate of Tax (GH¢)
1. Taxi and cars on hire within town 0.50 per week
2. ―Trotro‖ vehicles 19 seats and less 0.50 per week
3. ―Trotro‖ vehicles 20 to 34 seats 0.75 per week
4. ―Trotro‖ vehicles 34 seats and more 1.00 per week
5. Light dry cargo services (market
service)
0.75 per week
6. ―One pound one pound ― cars 0.005 per 0.10 fare per trip
7. Mini buses other than ―trotro‖ 0.005 per 0.10 fare per trip
8. Long distance passenger buses 0.005 per 0.10 fare per trip
9. Container trucks in Accra- Tema 0.005 per 0.10 charger per trip
10. Long distance cargo trucks and
articulated vehicles
0.005 per 0.10 charger per trip
11. Wet cargo vehicles including water
tankers
0.005 per 0.10 charger per trip
12. Tipper trucks 0.005 per 0.10 charger per trip
102
INTERNAL REVENUE (AMENDMENT) REGULATIONS, 2003
Vehicle type Annual tax
GH¢
Quarterly tax
GH¢
Taxis and cars on hire within town
―Trotro‖ (Up to 19 seats)
‗Trotro‖ (20-30 seats)
―Trotro‖ (35 seats)
Light dry cargo(small)
Light dry cargo(large)
One- pound- one- pound
Mini buses other than ―Trotro‖
(Up to 19 seats)
Long distance passenger buses
(20-33 seats)
Long distance passenger buses
(34-60/70 seats)
Long distance cargo trucks and
articulated vehicles
Fuel/water tanker(4000 gallons)
Fuel/water tanker (2500 gallons)
Fuel/water tanker (2000 gallons)
Fuel/water tanker(1500 gallons)
Tipper truck (double axle)
Tipper truck(single axle)
19.2
19.2
28.8
38.4
259.2
388.8
21.17
22.7
41.52
136.08
486.00
77.76
51.84
43.20
34.56
120.96
86.40
48.0
4.80
7.20
9.60
64.80
97.20
5.29
5.69
10.38
34.02
121.50
19.44
12.96
10.80
8.64
30.24
21.60
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INTERNAL REVENUE (AMENDMENT) REGULATIONS, 2004 (GH¢)
Dry cargo vehicle below 2 tons -- 60.00 --15.00
Dry cargo vehicle between 2 tons and 3 tons -- 80.00 -- 2.00
Dry cargo vehicle between 4 tons and 7 tons --140.00 -- 35.00
Dry cargo vehicles (Double Axle) --240.00 -- 60.00
Articulated Trucks --360.00 -- 90.00
Timber Trucks --360.00 -- 90.00
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INTERNAL REVENUE AMENDMENT REGULATIONS, 2005
FORD BUSES
PEUGEOT CARS
PETROL/KEROSINE/WATER TANKERS
Up to 2000 gallons
Above 200gallons
Power Tiller Tankers
Sewage Tankers
DRY CARGO
Below 2 tons
2 to 3 tons
4 to 7 tons
Double Axle
Articulated trucks
Timber Trucks
TIPPER TRUCKS
Single Axle
Double
GH¢
60.00 15.00
32.00 8.00
80.00 20.00
120.00 30.00
24.00 6.00
80.00 20.00
60.00 15.00
80.00 20.00
140.00 35.00
240.00 60.00
360.00 90.00
360.00 90.00
160.00 40.00
240.00 60.00
105
12-14 Wheelers (14-18 cm)
Trailers (Above 18 cm)
HEAVY EQUIPMENT
Graders and Bulldozers
Pay Loaders
Fork Lift
Cranes
Tractors
GARBAGE TRUCKS
MOTOR HEARSE/AMBULANCE
RECOVERY/TOWEING TRUCKS
300.00 75.00
300.00 75.00
120.00 30.00 300,000.00
60.00 15.00 150,000.00
32.00 8.00 80,000.00
80.00 20.00 200,000.00
20.00 5.00 50,000.00
80.00 20.00 200,000.00
40.00 1.00 100,000.00
32.00 8.00 80,000.00
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APPENDIX B
INTERNAL REVENUE V.I.T WORKING DOCUMENT
NO TYPE OF
CAR
AMOUNT
OLD NEW
NO TYPE OF
CAR
AMOUNT
OLD NEW
A1 Tractor 50,000 GH¢ 5.00 D1 Pay
Loaders/Dry
Cargo/Kia
Bongo/s/Below
2 Tons
150,000 GH¢ 15.00
A2 Taxis/Private
Taxi
60,000 GH¢ 6.00 D2 Dr Cargo 2-3
Tons/ Tanker
200 Cabbage
Trade titan
Sewerage
Tanker crane
200,000 GH¢ 20.00
A3 1 Pound/Trotro 80,000 GH¢ 8.00 D3 Tanker above
200 gallons,
Graders Bull
Dozers
300,000 GH¢ 30.00
B1 Hirling
Cars/Trotro up
to 19 Persons
100,000 GH¢
10.00
D4 Dry- cargo 4-7
Tons (Single
Axle)
350,000 GH¢ 35.00
B2 Trotro (20-23) 110,000
GH¢11.00
D5 Tipper trucks
(Single Axle)
400,000 GH¢ 40.00
B3 Trotro (24-32) 150,000 GH¢
15.00
D6 Double Axle
Cargo/Tipper
(Double Axle)
(Cargo Double
Axle)
600,000 GH¢ 60.00
C1 Commuter 100,000 GH¢ D7 Articulator, 900,000 GH¢ 90.00
107
(Long Journey
up to 15
persons)
10.00 Timber
Tractor above
18 cubits
C2 Commuter
(Long Journey
16-19 persons)
140,000
GH¢14.00
D8 Tipper trucks
(12-14
wheelers)
750,000 GH¢ 75.00
C3 Ford
Bus/Commuter
20-23 (207-23
Seats)
150,000 GH¢
15.00
D9 Ambulance
/Motor Hearse
100,000 GH¢ 10.00
C4 Tour Operators
up to 15 and
Commuter 24-
38
200,000 GH¢
20.00
C5 Tour Operators
16-23 and
Commuter 39-
45
250,000 GH¢
25.00
C6 Tour operators
24-38
350,000 GH¢
35.00
C7 Tour Operators
above 45 &
Commuter 46-
60
600,000 GH¢
60.00
108
APPENDIX C
KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY
INSTITUTE OF DISTANCE LEARNING
Dear Sir/Madam,
SURVEY ON ASSESSING THE PROSPECTS AND CHALLENGES OF VEHICLE
INCOME TAX IN THE KUMASI METROPOLIS
A survey is being conducted on the prospect and challenges of Vehicle Income Tax in the
Kumasi metropolis. Your candid opinion will help improve the administration in Ghana. The
study is purely academic and every piece of information provided will be treated with the
utmost confidentiality and besides, your anonymity is assured.
Thank you for your assistance.
QUESTIONNAIRE FOR DRIVERS FROM IDENTIFIABLE TRANSPORT GROUPS
SECTION A
1. Sex a) Female b) Male
2. Age Range a) 20-29 years b) 30-39 years
c) 40-49 years d) 50-59 years e) 60 years and above
109
3. What is your educational background?
a. Junior High School (JHS)
b. Senior Secondary School (SHS)
c. HND graduate
d. Graduate
e. Post graduate
4. Indicate the type of Vehicle you drive.
a) Taxi b) Urvan /‗Trotro‘ c) Others (Bus, heavy duty cars, etc)
5. How long have you been with your union?
a. Under 5 years (Don‘t continue)
b. Between 5-10 years
c. Between 10-20 years
d. 20 years and above
SECTION B
6) How would you rate your union when it was managing of VIT collection?
a) Very good b) Good c) Average d) Poor e) Very Poor
7) How would you rate IRS when it comes to VIT administration?
a) Very good b) Good c) Average d) Poor e) Very Poor
8) Should VIT administration be given back to the Identifiable groups (GPRTU etc)?
a) Yes b) No
110
9) If Yes why?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………
10) If No why?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………
11) In what ways do you think that the Identifiable Groups did well with VIT?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………
12) In what ways do you think that the IRS did well with VIT?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………
13) Who enforced VIT when it was in the hands of the Identifiable groups?
……………………………………………………………………………………………………
………………………………………………………………………………………………
14) Did you like the measure in place? A) Yes b) No
111
15) Do you subscribe to the notion that Ghana Police should enforce VIT collection?
(a) Yes (b) No
16) Have you ever seen IRS personnel inspecting VIT stickers with the Police before?
(a) Yes (b) No
17) Do you think the Police is playing the monitoring role well?
(a) Yes (b) No
SECTION C
18) What were the problems you faced when VIT was in the hands of your union?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………
19) What makes it difficult to pay VIT now?
……………………………………………………………………………………………………
………………………………………………………………………………………………
20) Do you think that VIT should be replaced with another Tax?
(a) Yes (b) No
112
21) What do you like about the payment of VIT in the hands of your union?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………
22) What do you like about the payment of VIT in the hands of IRS?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………
23) What are some of the ways that VIT can be improved to maximize tax revenue and also to
make easy for you to pay VIT?
……………………………………………………………………………………………………
………………………………………………………………………………………………
24) How many times do you buy VIT sticker in a year?
a). Once b). Twice c). Trice d). Four times
25) Should the quarterly payment of VIT be maintained? a). Yes b). No
26) If Yes, why?
……………………………………………………………………………………………………
………………………………………………………………………………………………
27) If No, why?
……………………………………………………………………………………………………
………………………………………………………………………………………………
113
28) Do you go through any difficulties in the payment of VIT?
a). Yes b). No
29) If Yes, List them
……………………….............................................................................…………………………
……………………………………………………………………………………………...……
……………………………………………………………………………………………
30) Have you ever filed your tax returns before? a). Yes b). No
31) Which of these do you prefer being assessed?
a) Monthly b) Quarterly c) Bi-annual d) Annual e) Keep to the stickers
32) Has a driver paid tax on his wage before? a). Yes b). No
33) What is your income for the day after deducting all recently expenses?
34) What number of days do you work in a week?
a) 1-3 days b) 4 days c) 5 days d) 6 days e) 7 days
35) List all the deductions you make to KMA and others in a……..
a) Day b) Month c) Quarterly d) Half year e) Annually
114
SECTION D
36) When do you pay your VIT?
a) Monthly b) Quarterly c) Half year d) Annually
37. Do you know the time and month that you have to pay VIT? a) Yes b) No
38) Can you buy VIT at any IRS district office? a) Yes b) No
39) Do you struggle to pay VIT? a) Yes b) No
40) Do you agree that you are just paying for the price of the stickers and not the VIT tax?
a) Yes I agree b) No I disagree
41) Should the government increase VIT? a) Yes b) No
42) Do you agree with the rate and categories of the VIT payments?
a) Yes b) No
43) Should VIT be added to Vehicle, Examination, Inspection and Licensing Division
(VEILD)? a) Yes b) No
44) Do you spend time to buy the VIT stickers? a) Yes b) No
45) What do you think is the cause?
………………………………………………………………………………………………….…
…………………………………………………………………………………………….............
.........................................................................................................................................................
115
46) Suggest other ways of obtaining VIT stickers in a more convenient way
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
47) Should the payment of VIT be automated and routed through the banks?
a) Yes b) No
48. Have you as a driver or owner ever paid SSF before? a) Yes b) No
49. What are the reasons why the Transport Unions are not as vibrant as ever?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
50. What is the attitude of IRS toward you as drivers/transport owners when it comes to
VIT administration?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
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APPENDIX D
KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY
INSTITUTE OF DISTANCE LEARNING
SURVEY ON ASSESSING THE PROSPECTS AND CHALLENGES OF VEHICLE
INCOME
TAX IN THE KUMASI METROPOLIS
Interview Guide for Regional Director and District Managers
1. Do you think IRS is maximizing VIT in Ashanti Region?
2. What are the challenges you face in administering VIT?
3. What can be done to improve VIT collection in Ashanti Region?
4. Why was VIT taken from the Identifiable groups?
5. Do you agree that the mode of payment of VIT should be varied?
6. In what way?
7. Do you see weakness in VIT administering?
8. What can be done to solve the problem?
9. Does VIT have a future?
10. In what way?
11. How do you compare the performance of VIT in the hands of IRS and identifiable
groups?
12. Which category of VIT type brings in more revenue?
13. Why the rate of VIT has remained constant from 2005?
14. Were the Identifiable groups collecting VIT on your behalf?
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15. What were the controls to check VIT collections in the hands of the Identifiable
groups?
16. What measures have you put in place to check VIT collection?
17. Comment on your regions performance of VIT.
18. How was VIT monitored when it was in the hand the Identifiable groups?
19. Why was VIT taken from the Identifiable groups?
20. What can be done to improve VIT in terms of payment?
21. Has revenue for VIT been increased as compared to when it was being administered by
the Identifiable groups?
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APPENDIX E
KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY
SURVEY ON ASSESSING THE PROSPECT AND CHALLENGES OF VEHICLE
INCOME TAX IN THE KUMASI METROPOLIS
Interview Guide for IRS-STAFF
1. How will you rate your own performance?
………………………………………………………………………………………
2. What are some of the challenges you are facing concerning VIT administration?
……………………………………………………………………………………………
………………………………………………………………………………………
3. What can you do to improve VIT administration?
……………………………………………………………………………………................
4. Do think that the Police should be tasked to enforce VIT collection? a) Yes b) No
5. Why?
…………………………………………………………………………………………
6. Do you think that drivers pay true taxes by paying the quarterly rate (VIT)?
7. What do you think can be done to assess commercial vehicle drivers well? Please list
them.
………………………………………………………………………………………………
………………………………………………………………………………………………
8. What do you think should be done to improve VIT collections?
9. Compare your performance with the Identifiable groups.
10. What are the weaknesses of VIT administration
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APPENDIX F
KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY
INSTITUTE OF DISTANCE LEARNING
SURVEY ON ASSESSING THE PROSPECTS AND CHALLENGES OF
VEHICLE INCOME TAX IN THE KUMASI METROPOLIS
Interview Guide for Management of Identifiable Groups
1. Can you please give a brief history of your union?
i. When was it established?
ii. Why was it established?
iii. Location of your union members within the metropolis (station)
iv. Current membership (estimated)
v. Which categories of drivers (vehicle type) dominate your union?
2. What challenges did you encounter when your union was in charge of administering
VIT?
3. When given another chance of administering VIT, what are the measures you would
adopt to improve VIT collections?
4. In what ways do you think that IRS is not doing well with VIT?
5. What part can you play to improve VIT collection?
6. What do you see as weaknesses of VIT?
7. Do you agree that Ghana Police should monitor and enforce the payment of VIT?
8. Give reasons for your answer.
9. Do you agree with the mode of payment?
10. Suggest alternatives to improve the mode of payment.
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11. What are some of the problems your union members face in the payment of VIT?
12. What was the mode of payment when your union was in charge of VIT?
13. What were the processes involve?
14. How were you accounting for VIT?
15. Would you like to be in charge of VIT?
16. Is your union as vibrant as it used to be?
17. What has accounted for your answer above?
18. What is good about IRS management of VIT?
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