Little did we know that the President and Congress will cause the rebirth of private tax collection agencies (PCAs) to partner the Internal Revenue Service (IRS) in collecting tax bills from delinquent debtors. Congress passed the $305 billion, 5 Year Infrastructure Spending Bill now the Fixing America’s Surface Transportation Act (FAST Act) on December 3, 2015, and signed by President Obama on December 4. Therein a provision which requires IRS to contract the services of private tax collection agencies in raising tax revenues. What’s going on? Just wait a minute, and I will find out!
A Private Collection Agency is a company that specializes in the collection of delinquent debts through surfing mountains of database and physical locations to find and contact their clients by employing techniques such as making telephone calls, sending letters, and proposing payment options to debtors.
The US Congress has gone back to the use of private tax collection agencies for collecting tax revenues from delinquent tax payers after two previously failed attempts between 1996 -1997 and between 2006-2009. The results from the pilot program were far from stellar leading to the annulment. That notwithstanding, the Internal Revenue Service will used them in early part of 2017 to complement their efforts in assessing, collecting and accounting for tax revenues which are inactive , aged, and outstanding with deviant tax payers.
US Congress believes that the use of PCAs will assist the IRS to rake in additional tax revenues from delinquent tax payers that the IRS can’t find or difficult to collect. Other supporters of this initiative explained that the use of PCAs will rope in new taxpayers into tax brackets who were hitherto outside the tax net. My Cousin, an optimist, has his say on this subject and posits that PCAs will help improve tax compliance and tax collection. He also convinced me to appreciate the essence of PCAs in helping the IRS to bridge the budget deficit and hand over jobs to private individuals.
Critics are of the view that Congress has just created a door for scammers to exploit innocent tax payers by acting as private tax collection agencies and bugging them with unpaid tax bills.
Advocates of information secrecy and privacy postulate that the use of PCAs will require the IRS to share tax payers’ information and this could give rise privacy concerns if not handled professionally.
If there is any country to tap into the lessons from the US Congress, then, Ghana is among those countries. Ghana could pass the necessary legislation instructing the Ghana Revenue Authority to contract private tax collection agencies to augment their efforts in assessing and collecting tax revenues in the hands of delinquent tax payers. There is no better time for the use of PCAs than now, especially at the time where the public purse is overstretched, and the country having hit with a rocky economic fist from plummeted global commodity prices, a sluggish global economic activity and reduction in donor support.
The government will have to cause the amendment of the current tax regime to accommodate the use of PCAs by GRA.
Opponents argue that the use of PCAs may cause the GRA to relent in their mandate to collect taxes owed to the state. Others submit that the use of PCAs will only add more to the cost of administration than to the tax revenue basket.
Whatever it is, every coin has two sides and the GRA should undertake a cost benefit analysis about the use of PCAs in tax collection and advise government to marry it if there is indeed a business case.
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