US embassy cable - 04ACCRA2455

UNCLAS SECTION 01 OF 02 ACCRA 002455 
 
SIPDIS 
 
TREASURY FOR ALEX SEVERENS/LUKAS KOHLER 
STATE FOR RICH KAMINISKI/LARRY JOHNSTON 
 
E.O. 12958: N/A 
TAGS: EFIN, EAID, GH 
SUBJECT: GHANA: POST SUPPORTS TREASURY'S CONTINUED FUNDING 
OF THE GHANA TAX ASSISTANCE PROGRAM 
 
 
Summary 
------- 
1. In 2003 the U.S. Treasury Department, with co-funding from 
USAID, initiated the Ghana Tax Assistance Project, designed 
to improve management and revenue collection for Ghana's IRS 
and VAT Service.  USAID will end its financial support of the 
program in February 2005 due to budget constraints and 
because the Swiss will be providing significant assistance to 
Ghana's tax arena in the near term.  The Ghanaian agencies 
that have benefited have approached Post to support full 
Treasury funding at least through year-end 2005.  Post 
discussed the program with Treasury's tax advisors and 
Government of Ghana (GoG) authorities and concluded the 
benefits are worthwhile.  Post recommends further Treasury 
funding through the end of 2005.  End Summary 
 
Program Background 
------------------ 
2. The U.S. Treasury Department's Office of Technical 
Assistance (OTA) initiated a Ghana Tax Assistance Project in 
2002, which was co-funded by USAID.  The project has provided 
training, executive seminars and technical assistance to 
Ghana's IRS and VAT Services to improve revenue collection. 
The funding levels were USD 130,000 in CY 2002, USD 270,000 
in CY 2003, and projected USD 300,000 for CY 2004.  USAID, 
however, has ceased its financial support of the OTA program 
due to budget constraints and because the Swiss government is 
planning to provide assistance to Ghana's tax agencies in the 
near term.  USAID will continue to work on tax policy issues 
in Ghana.  (Note:  USAID's financial support for the program 
officially terminates February 2005, but funding allotted to 
the tax assistance project has already been spent.  End Note) 
 
 
GOG Accolades for Treasury Consultants 
-------------------------------------- 
3. There has been positive feedback from Ghana's IRS and VAT 
services as to the value and benefits of the Treasury 
expertise.  In a recent letter, the Commissioner of the VAT 
Service, Mr. J.F. Odartey Blankson, stated that Treasury 
programs and activities contributed significantly to 
improvements in the outlook and appreciation of tax 
management and administration issues of participants in their 
daily activities and to the overall VAT Service planning 
process.  Blankson attributed the VAT Service's improved 
performance to their enhanced management capacity and human 
resource capacity.  The latter was strongly linked to 
training programs, which the Treasury program has actively 
supported.  The VAT Service is working to increase human 
resource capacity to continue improvements in service quality 
and tax compliance, and has requested continued Treasury 
assistance towards this end. 
 
4. Ghana's IRS expressed gratitude to Treasury and USAID for 
the invaluable assistance they have provided, which has made 
a visible impact on tax administration in Ghana.  In a letter 
from the IRS, Commissioner Janet Opoku-Akyeampong said that 
Treasury consultants advised the IRS in its production of a 
new collection manual which led to a doubling of collected 
revenue in assessed districts during a recent pilot test. 
The IRS also notes that workshops for executives contributed 
to the development of the agency's vision and mission 
statements.  Middle level managers lauded the courses on 
management skills.  Currently, Treasury consultants are 
assisting in formulating an appropriate management succession 
plan, an audit manual, gaming legislation, and a collection 
management information system to monitor collection and 
identify areas that need taxpayer education and compliance. 
The IRS has indicated that it requires the continued 
technical assistance of Treasury consultants in order to see 
these projects through to completion. 
 
Treasury's Measurable Results 
------------------------------ 
5. In addition to GOG feedback, the Tax Assistance Program 
has produced some impressive statistical results.  In 2003, 
the IRS saw a 43.6 percent increase in revenue collection 
over 2002.  Current estimates for 2004 are for revenue to 
increase almost an additional 50 percent over 2003. Data from 
Ghana's Collection Manual Pilot districts are even more 
impressive.  Treasury statistics show that in one district 
the revenue collected between January and July of 2004 was 78 
percent higher than the same period in 2003; the other 
district showed a 56 percent increase. 
 
6. Though current indicators are impressive, Treasury 
consultants expect that revenue collected will continue to 
increase.  Once transportation and telephones are regularly 
available to Collection and Audit Specialist Inspectors, 
increased field visits should facilitate the collection of 
delinquent taxes, the securing of unfiled tax returns and the 
addition of new non-filer taxpayers to the tax rolls, 
ultimately increasing voluntary compliance and tax revenues. 
(Note:  USAID recently donated seven vehicles to the IRS to 
complement the work of the Treasury program, specifically to 
allow IRS officers to do more field work.  Treasury 
consultants expect this donation to result in higher tax 
revenues over the next year.  End Note) 
 
Program Merits Further Funding 
------------------------------ 
7. USAID has indicated that their funding freeze for the 
Treasury support is solely due to budgetary constraints and 
not due to any deficiencies in the program itself.  Post 
believes that terminating the program at this point will 
interrupt the very good work that has been achieved to date. 
Post supports the GOG call for continued funding of the 
program and believes the program benefits are worthwhile. 
Post recommends continued Treasury Department funding of the 
Ghana Tax Assistance Project through at least the end of 
2005. 
LANIER