Compturised Tax System and Revenue Mobilzation

Topics: Tax, Taxation in the United States, Internal Revenue Service Pages: 39 (11165 words) Published: May 11, 2013
INTRODUCTION 1.1 Background of Study.
Every sovereign State possesses a prerogative to impose taxes, duties, fees and other charges to perform its basic functions (Contact; 2007). By this, Tax administrations can mobilize financial resources in order to secure the provision of public services such as education, infrastructure, health services, or social protection. This is to say that revenue administrations occupy a pivotal position in the mobilization of domestic financial resources (Contact; 2007). But over the years, many developing countries lack an efficient tax collection system, leaving in some cases more than 60% of the tax potential untapped. In these countries, sustainable development and fiscal independence can only be achieved through an improvement of taxation processes (Napierala & Kiefer; 2009). According to Miyahira (2008), the technological innovation has been an important matter in tax and revenue collection. The advent of new instruments to help businesses work more efficiently affects the way taxes and revenues are collected. Information Technology (IT) changes at a rapid pace that the existing fiscal systems become obsolete in a short period of time. The necessity to integrate former existing structures is becoming more demanding since new applications need to be created to assist the dynamics of financial processes. In addition, the quantity of processing data augments each year, which requires a scalable infrastructure to keep the fiscal processes working. With the introduction of Information and Communication Technologies (ICT) in revenue administrations, efficiency and transparency will be enhanced, contributing to the -1-

improvement in tax assessment and collection systems for the attainment of national growth and development. The researcher will provide some evidence based on the examples of a computerized integrated tax administration system that was developed in some countries and how it has helped to improve the revenue base within the Tema Metropolis.

1.2 Statement of Problem
The three Revenue Agencies have failed to achieve success in their revenue mobilization efforts due to their manual system of operation. The Commissioner of (IRS), Major Daniel Sowah Ablorh-Quarcoo (Rtd.), in (B&F T.; 2009) said that, “According to records at the Registrar Generals Department, there are 226,760 self employed registered in the informal sector but it is sad to note that only 53,352 are registered with IRS and are being assessed to tax. Data management in a manual system is not only difficult but cumbersome and slow and as a result many potential taxpayers are able to dodge the tax net”. As a result of the inefficient and ineffective manual system of tax administration, the tax burden has always fallen on the few in the formal sector, although it is estimated that in terms of economic activity, about 83 percent is carried out by the self employed sector (B&F T.; 2009). According to (Sohne; 2003) with the current manual system of revenue collection, it is not always clear when and where under-collection is taking place. When payments are missed or are collected late without penalty, cash flow is adversely affected, resulting in reduced or late revenue that can be reduced using an automated system. The problem is -2-

further compounded when revenue intended for government go into the pockets of revenue officials due to the incidence of corruption from the issue of fraudulent receipts to tax payers. Sohne (2003) also found that, there are Problems such as high costs for collection, fraud, underpayment and leakages in revenue collection. And this could be made worse by the massive expansion in the current taxable base without the use of adequate computerized solutions. The problems of tracking and identifying fraud or rogue revenue collectors are only compounded by the usage of manual or centralized systems due to the resources and overheads needed to monitor and control such...
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