In almost all nations of the world today, taxes form the most important part of governments’ venue. The need for taxation the world over and particularly, the “Third World”, has become necessary; and will remain so with the increasing dependence of the citizenry on the central government for the provision of infrastructure and other necessaries of life. In Ghana, the central government provided and continues to make available such infrastructure as roads, portable water, rural and urban electrification, hospitals, schools and many others. In addition, the state provides defense for its people against external aggression and the maintenance of law and order.
The indisputable fact is that none of these social and economic needs enumerated above can be satisfied by any government without adequate revenue. It is based on this fact that there was the need for the government to levy taxes on the income of the legible citizenry.
The Ghana Revenue Authority (Domestic Tax Revenue Division) is charged with that utmost responsibility of levying and collecting taxes on the incomes of individuals such as the Employed and Self-employed, (Income Tax), corporate bodies (Corporation Tax), Capital Gains (Capital Gains Tax) and others. Income taxes are different from other sources of revenue in that they are compulsory levies and are unrequited; they are not paid in exchange for any specific thing. In spite of the many contributions of taxation, the Ghana Revenue Authority (Domestic Tax Revenue Division) faces certain challenges in mobilizing revenue. 1.1 BACKGROUND OF THE STUDY
The idea of taxation in Ghana, the then the Gold Coast, could be dated as far back as 1852AD. This idea was hatched by Lord Greg, the then colonial secretary to the Gold Coast. The reason behind this idea was that the Gold Coast had then been upgraded into a district, dependent of the British Crown, with its own executive and legislative council. This occurred when the British moved into the Gold Coast from Sierra Leone in 1850 to establish forts and build settlements.
In that period, available records showed that expenditure had increased automatically and it was prudent that new sources of revenue were to be sought somewhere to support such increased expenditure. It was abundantly clear that the annual parliamentary grant of four thousand pounds (£4,000) offered by the British Crown to the Gold Coast government to cover public expenditure was just inadequate. Lord Greg, therefore, felt that the public projects planned should be financed by the local people themselves. Hence, suggested the imposition of direct taxation of some sort on the eligible citizens who were engaged in some business or work of a kind.
Based on this, a form of tax termed “Poll Tax” was introduced in the Gold Coast in 1852 by imposing one (1) shilling per head on all citizenry. It did not, however, function well because the target of twenty thousand pounds (£20,000) set in the first year, only six thousand, six hundred and fifty-six pounds (£6,656) was collected. Rioting erupted in certain parts of the colony because, some citizens opposed the idea of the tax. In 1856, investigations were made by a committee on the complaints made against the tax. This led to the exemption from tax of the old, the weak and the young children. This plan did not function well. Consequently, by the Year 1862, the poll tax administration collapsed. As a result, a consolidated edition (Income Tax Decree, 1966 No.78) was published in September 1966 and a second consolidated edition (The Income Tax Decree, SMCD5) was also instituted in December, 1975. From 1944 to 1961, the Internal Revenue Service was known as the Income Tax Department and later changed to Central Revenue Department. Eventually, it was changed to be known as the Internal Revenue Service (IRS) on the 1ST July 1986 by the PNDCL 143 of 1986. It was grafted in the civil service under the ministry of...