UNIVERSITY OF GHANA COLLEGE OF HUMANITIES REGULATORY GOVERNANCE AND TAXATION OF E-COMMERCE IN GHANA BY EUNICE KAFUI APRIM (10415153) THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF MPHIL IN ACCOUNTING DEGREE NOVEMBER, 2021 University of Ghana http://ugspace.ug.edu.gh DECLARATION I, Eunice Kafui Aprim, hereby declare that this thesis has not been documented earlier for presentation in this University or any other University. I therefore declare that this thesis is my own work and all references have been acknowledged accordingly. ………………………………… …………………………… Eunice Kafui Aprim Date (10415153) University of Ghana http://ugspace.ug.edu.gh ii CERTIFICATION I hereby certify that this thesis was supervised in accordance with procedures laid down by the University. ……………………………………. ……………………………….. Dr. Samuel Nana Yaw Simpson Date (Supervisor) ……………………………………. .................................................... Dr. Joseph Mensah Onumah Date (Supervisor) November 19, 2021 November 19, 2021 University of Ghana http://ugspace.ug.edu.gh iii DEDICATION I dedicate this thesis to the Almighty God for His faithfulness and loving-kindness. University of Ghana http://ugspace.ug.edu.gh iv ACKNOWLEDGEMENTS My primary gratitude goes to the Almighty God for His provision, favour, and strength throughout this phase of education. My other appreciation goes to my supervisors Dr. Samuel Nana Yaw Simpson and Dr. Joseph Mensah Onumah for their patience, guidance, and corrections over the period of writing this thesis. I would also want to specially thank Dr. Simpson who invested so much time, money, and effort to ensure that this thesis and this qualification becomes a reality. You are indeed a father and may God Himself be your reward and may you never lack any good thing. My appreciation also goes to Dr. Amidu and Dr. Coffie, for their genuine concern for me to ensure that I complete this MPhil programme as well as all the lecturers who provided their useful inputs in this work. I would also want to show appreciation to Emmanuel Martey, Kwame Ampim Darko, Daniel Owusu, Abena Biney, Charlotte Forson, and Euphemia Afful for their follow-ups and their pressure to ensure that I completed this thesis. Finally, I would want to thank my parents; Daniel and Victoria Aprim, elder siblings; Eva Tetteh- Kpalam, Joana Ahiataku, and Eric Aprim, and all my friends and colleges for their support. God richly bless them. University of Ghana http://ugspace.ug.edu.gh v ABSTRACT This study aims to understand the regulatory governance of e-commerce entities and how such businesses are taxed, which is limited to the country Ghana. The study considers the regulators of e-commerce and the other institutions that are linked to obtain their perceptions of the regulatory governance and taxation of e-commerce. The qualitative approach is utilized for this study to enhance the depth of the study. Interviews were conducted to ascertain the views of the regulators. In addition, the perceptions of other institutions like practicing firms and other civil society organizations were gathered by way of interviews to broaden the scope of our understanding of e- commerce in Ghana. A within and across case analysis has been performed on data gathered to identify consistencies or otherwise. An extant synthesis of related literature and a review of the websites of the regulators and their regulations supported the content analysis done in this study to understand the concept of regulatory governance and the nature of regulatory governance and taxation of e-commerce in Ghana. Results indicate varied results on the presence of factors supporting regulatory governance in some regulatory institutions, however, this is consistent within and across respondents. Also, results from the taxation of e-commerce indicated the issues in taxing e-commerce and the apparent lack of enforcement of related tax laws, which is primarily because of difficulty in tracing e-commerce entities. In light of the results, some regulatory governance factors should be improved to ensure better regulatory governance. It also brings to the fore the need for revision of tax laws to clearly identify e-commerce entities for tax purposes as there is a growing need to raise more tax revenues in Ghana. University of Ghana http://ugspace.ug.edu.gh vi TABLE OF CONTENTS DECLARATION............................................................................................................................ i CERTIFICATION ........................................................................................................................ ii DEDICATION.............................................................................................................................. iii ACKNOWLEDGEMENTS ........................................................................................................ iv ABSTRACT ................................................................................................................................... v TABLE OF CONTENTS ............................................................................................................ vi LIST OF TABLES ........................................................................................................................ x LIST OF FIGURES ..................................................................................................................... xi LIST OF ABBREVIATIONS .................................................................................................... xii CHAPTER ONE ........................................................................................................................... 1 INTRODUCTION......................................................................................................................... 1 1.1 Background ........................................................................................................................... 1 1.2 Problem Statement ................................................................................................................ 3 1.3 Research Purpose .................................................................................................................. 6 1.4 Research Objectives .............................................................................................................. 6 1.5 Research Questions ............................................................................................................... 6 1.6 Significance of the Study ...................................................................................................... 6 1.7 Scope of the Study................................................................................................................. 8 1.8 Organization of the Study ..................................................................................................... 8 CHAPTER TWO ........................................................................................................................ 10 LITERATURE REVIEW .......................................................................................................... 10 2.0 Introduction ......................................................................................................................... 10 2.1 Definition of Terms ............................................................................................................. 10 2.1.1 E-Commerce ................................................................................................................. 10 2.2 Implications of E-Commerce- The Need for Regulation .................................................... 11 2.2.1 Implications of E-Commerce: The Case of Privacy ..................................................... 11 2.2.2 Implications of E-Commerce: The Case of Security .................................................... 13 2.2.3 Infrastructural Limitations of E-commerce .................................................................. 14 2.3 Overview of Regulatory Governance .................................................................................. 15 2.3.1 The Concept of Regulatory Governance ...................................................................... 16 University of Ghana http://ugspace.ug.edu.gh vii 2.3.2 The Need for Regulatory Governance .......................................................................... 18 2.4 Good Regulatory Governance Framework ......................................................................... 19 2.4.1 Regulatory Independence, Accountability and Transparency ...................................... 19 2.4.2 Regulatory Expertise .................................................................................................... 24 2.5 Nature of E-Commerce Regulation in Ghana ..................................................................... 25 2.5.1 Data Protection Commission ........................................................................................ 26 2.5.2 National Communications Authority ............................................................................ 26 2.5.3 Ghana Revenue Authority ............................................................................................ 27 2.6 Taxation of E-Commerce .................................................................................................... 28 2.7 E-Commerce Tax Issues...................................................................................................... 29 2.7.1 Consumption Tax Issues ............................................................................................... 29 2.7.2 International Tax Issues ................................................................................................ 30 2.7.3 Tax Administration Issues ............................................................................................ 30 2.7.4 Base Erosion and Profit Shifting (BEPS) ..................................................................... 31 2.7.5 Nexus for Taxation ....................................................................................................... 32 2.8 Taxation Mechanisms for E-Commerce ............................................................................. 32 2.8.1 Bit Tax Proposal ........................................................................................................... 32 2.8.2 European Union E-commerce Proposal for VAT......................................................... 33 2.9 Theoretical Review ............................................................................................................. 34 2.9.1 Public Interest Theory of Regulation ............................................................................ 34 2.9.2 The Application of the Public Interest Theory to E-commerce in Ghana .................... 35 2.10 Conceptual Framework ..................................................................................................... 37 CHAPTER THREE .................................................................................................................... 39 METHODOLOGY ..................................................................................................................... 39 3.0 Introduction ......................................................................................................................... 39 3.1 Philosophical Paradigm ....................................................................................................... 39 3.1.1 Ontology ....................................................................................................................... 40 3.1.2 Epistemology ................................................................................................................ 42 3.2 Research Design .................................................................................................................. 43 3.3 Data Collection Process ...................................................................................................... 45 3.4 Population and Sampling .................................................................................................... 46 University of Ghana http://ugspace.ug.edu.gh viii 3.5 Data Analysis and Interpretation ......................................................................................... 49 3.5.1 Interviews with Regulatory and Taxation Institutions ................................................. 49 3.5.2 Analysis of Secondary Data ......................................................................................... 51 3.6 Reliability and Validity ....................................................................................................... 51 3.7 Ethical Stance ...................................................................................................................... 52 CHAPTER FOUR ....................................................................................................................... 54 PRESENTATION AND ANALYSIS OF FINDINGS ............................................................. 54 4.0 Introduction ......................................................................................................................... 54 4.1 Nature of Regulatory Governance of E-Commerce in Ghana ............................................ 54 4.1.1 Reviewing E-Commerce Regulation and Taxation Laws in Ghana ............................. 54 4.2 Awareness Level of E-Commerce Regulatory Governance ............................................... 57 4.2.2 Awareness of E-commerce ........................................................................................... 58 4.2.2 Distinguishing Factors of E-commerce ........................................................................ 59 4.3 Regulatory Independence, Accountability and Transparency of E-Commerce .................. 60 4.3.1 Regulatory Independence of E-Commerce ................................................................... 60 4.3.2 Regulatory Accountability of E-Commerce ................................................................. 72 4.3.3 Regulatory Transparency of E-Commerce ................................................................... 80 4.4 Perceptions of Regulatory Independence, Accountability, and Transparency of E- Commerce ................................................................................................................................. 84 4.4.1 Perceptions of Regulatory Independence of E-Commerce ........................................... 84 4.4.2 Perceptions of Regulatory Accountability of E-Commerce ......................................... 90 4.4.3 Perceptions of Regulatory Transparency of E-Commerce ........................................... 94 4.5 Regulatory Expertise of E-Commerce ................................................................................ 97 4.5.1 Capacity of Entity to Regulate ...................................................................................... 97 4.5.2 Appropriate Level of Skill of Staff to Conduct Regulatory Activities ......................... 99 4.5.3 Frequency of Training ................................................................................................ 101 4.5.4 Effectiveness of E-Commerce Framework ................................................................. 102 4.5.5 Measures to Ensure Professionalism and Confidentiality .......................................... 104 4.6 Perception of Regulatory Expertise of E-Commerce ........................................................ 106 4.6.1 Capacity of Entity to Regulate .................................................................................... 106 4.6.2 Appropriate Staff Skill to Conduct Regulatory Activities .......................................... 107 University of Ghana http://ugspace.ug.edu.gh ix 4.6.3 Perception of Current Framework in Regulating E-Commerce ................................. 108 4.6.4 Measures to Ensure Professionalism and Confidentiality .......................................... 109 4.7 Taxation of E-Commerce .................................................................................................. 110 4.7.1 E-Commerce Tax Issues ............................................................................................. 110 4.7.2 Tax Laws and E-Commerce ....................................................................................... 113 4.7.3 Measures to Address E-Commerce Tax Issues .......................................................... 115 4.7.4 E-Commerce Taxation Approaches ............................................................................ 118 4.8 Perceptions of Taxation of E-Commerce .......................................................................... 120 4.8.1 Perceptions of E-Commerce ....................................................................................... 121 4.8.2 Perceptions of Differences between E-Commerce and Other Forms of Business ..... 121 4.8.3 Perception of E-Commerce Tax Issues ...................................................................... 122 4.8.4 Perception of GRA’s E-Commerce Taxation Approach ............................................ 126 4.9 Discussion of Findings ...................................................................................................... 127 4.9.1 Regulatory Independence, Accountability and Transparency .................................... 127 4.9.2 Regulatory Expertise of E-Commerce ........................................................................ 130 4.9.3 Taxation of E-Commerce ........................................................................................... 132 CHAPTER FIVE ...................................................................................................................... 134 SUMMARY, CONCLUSION AND RECOMMENDATION ............................................... 134 5.0 Introduction ....................................................................................................................... 134 5.1 Summary of Findings ........................................................................................................ 134 5.1.1 Regulatory Governance of E-Commerce ................................................................... 134 5.1.2 Regulatory Expertise .................................................................................................. 139 5.1.3 Taxation of E-Commerce in Ghana ............................................................................ 140 5.2 Conclusion ......................................................................................................................... 142 5.3 Recommendations ............................................................................................................. 144 5.4 Limitations of The Study................................................................................................... 145 REFERENCES ........................................................................................................................ 147 APPENDIXES ............................................................................................................................. a Appendix A............................................................................................................................... a Appendix B ............................................................................................................................... c Appendix C ............................................................................................................................... e University of Ghana http://ugspace.ug.edu.gh x LIST OF TABLES Table 4. 1: E-commerce Regulatory governance assessment of DPC regulations ....................... 54 Table 4. 2 E-Commerce Regulatory Governance Assessment of NCA regulations ..................... 54 Table 4. 3 E-Commerce Regulatory Governance and Taxation assessment of GRA regulations 55 Table 4. 4 Profile of Respondents ................................................................................................. 57 University of Ghana http://ugspace.ug.edu.gh xi LIST OF FIGURES Figure 2.1: Public Interest Theory and Regulatory Governance Relationship for E-commerce in Ghana ............................................................................................................................................ 37 Figure 3. 1 Research Paradigm ..................................................................................................... 40 University of Ghana http://ugspace.ug.edu.gh xii LIST OF ABBREVIATIONS GRA Ghana Revenue Authority DPC Data Protection Commission NCA National Communication OECD Organization for Economic Co-operation and Development IMF International Monitory Fund GDPR General Data Protection Regulation eIDAS electronic Identification Authentication and trust Services MoFEP Ministry of Finance & Economic Planning University of Ghana http://ugspace.ug.edu.gh 1 CHAPTER ONE INTRODUCTION 1.1 Background Africa is the second-largest continent after Asia, both in population and land area (Internet World Statistics, 2018), but was lagging in access to the internet and internet-related technologies – that was in the early 2000s. In recent times, however, statistics show improvements in the areas of penetration of the internet and user growth. For instance, Internet World Statistics (2018) indicated an internet penetration of 36.1% as compared to the global average of 55.1% for the period June 30, 2018. With a little over 4.5 million internet users in 2000, the number has increased to over 453.3 million in 2017. User growth over the period (2000-2018) was 10,199% as compared to the global percentage of 1066% within the same period (Internet World Statistics, 2017). Ghana equally showed a similar trend in internet and user growth as Africa did. Ghana had an internet penetration of 34.3% and an internet growth rate of 33,600% over the period 2000 to 2017. The number of internet users in Ghana in the year 2000 was 30,000, but this drastically rose to 10,110,000 in 2017 (Internet World Statistics, 2017). Access to the internet has accounted for new types of business transactions over the internet, called e-commerce. From accommodation to clothes to supplies, e-commerce has spread across various areas of traditional physical businesses to even include areas that are non-traditional such as mobile money (Jack & Suri, 2011) and online sports betting (Aflakpui & Oteng- Abayie, 2016). University of Ghana http://ugspace.ug.edu.gh 2 Also, according to eMarketer's most recent forecast in March 2018, retail e-commerce sales worldwide amounted to 2.3 trillion US dollars for 2017, and e-retail services are projected to be 4.88 trillion US dollars in 2021 (Statista, 2018). Indeed, the rate of transactions conducted over the internet has expanded globally, of which developing countries are gradually catching up with (Reardon et al., 2021; Ayob et al., 2021; Ayob, 2021). This is confirmed in the study conducted by Kaplan (2018) where Africa is identified as the next emerging E-commerce market. Publicly available information confirms Kaplan’s claim as statistics from Statista indicated that current revenue generated from e-commerce in Africa was approximately USD 16.5 billion in 2017 and is projected to be USD 29 billion in the year 2022. There appear to be several benefits and opportunities available with the increased use of e- commerce such as the reduction in transaction and coordination costs (Datta, 2011) as well as the enhancement of the bargaining power of producer firms (Gereffi, 2000). Other benefits include the reduction in production costs and the development of new products and services (Morrison, 2001). Such benefits were achieved by utilizing cheap coordinative transactions, online databases, and interconnected networks. However, some issues that require attention in the adoption of e-commerce. Some of the issues identified in the literature include privacy and security (Desai et al., 2003; Vakeel et al., 2017; Harris et al., 2003), taxation (Basu, 2016; Chan, 2000; Polezharova, & Krasnobaeva, 2020), infrastructure and policy-related issues in expanding the usage of e-commerce (Tigre & O’Connor, 2002; Ma et al., 2018; Cho & Lee, 2017). Therefore, this study explores the regulatory governance and taxation issues associated with the practice of e-commerce in Ghana. University of Ghana http://ugspace.ug.edu.gh 3 1.2 Problem Statement Several studies have been done in e-commerce in the wake of the potential issues it brings about, particularly about its regulation. Concerning e-commerce taxation, the studies done so far have shown the difficulty of taxing e-commerce businesses, with an emphasis on how this practice has affected tax revenues generated by countries (Basu, 2016; Chan, 2000; Bacache Beauvallet, 2018; Han, 2018). This is so because e-commerce businesses have a lot of peculiarities that distinguish them from other traditional forms of business; one of which is the apparent lack of physical presence in some countries. These challenges and complexities resulting from e-commerce and the like cause tax avoidance and tax evasion on a global scale (Hermawan, & Sinaga, 2020). Several suggestions have been made over time to resolve this, one of which is to tax e- commerce businesses based on the concept of permanent establishments, which would imply taxing e-commerce businesses based on the country of origin (Chan, 2000). However, concerns have been raised to such suggestions, as they do not favour developing countries since most e- commerce businesses do not originate from such countries thus missing out on the tax- generating opportunities when they rely on them for development (Cockfield, 2001; Polezharova, & Krasnobaeva, 2020). Another suggestion is to tax based on the destination principle (Agrawal & Fox, 2017). This is to show that there has been no conclusive means to tax e-commerce businesses that have been accepted by all countries. Still concerning the taxation of e-commerce, arguably, most studies primarily focused on arguments that are on the ‘conceptual' level, without any gathering of data. It has also been limited to analysis of tax laws and the implications in light of those laws (McLure, 2000; Chan, 2000). Other studies in this area gathered data from other available information to discuss the University of Ghana http://ugspace.ug.edu.gh 4 various issues on e-commerce and taxation. In McLure's (1997) study, for instance, he discussed tax issues raised by e-commerce in the light of the increasing role of services and tangible products which were not supported by any empirical evidence. Other studies done on the governance of e-commerce especially on the regulation of security and privacy have also followed a similar fashion. In Saraf and Kazi's (2013) study, for instance, focus was placed on the Brussels I as a regulation for e-commerce businesses in the European Union whiles the study carried out by Polański (2018) equally considered various regulations adopted such as the General Data Protection Regulation (GDPR) and electronic IDentification, Authentication and trust Services (eIDAS) as an assessment of the country of origin principle in the European Union. Van (2017) also considered the European Commission’s geo-blocking proposals such as the 2015 online content portability proposal and the 2016 general geo- blocking proposal to regulate e-commerce. However, per OECD’s publication on the principles for the governance of regulators (OECD, 2013), it was identified that regulatory outcomes did not depend entirely on well-designed rules and regulations but rather on some elements such as rules and regulations that are efficient and effective, the presence of high quality and empowered institutional capacity and resources- especially in leaderships and finally, appropriate institutional frameworks and related governance arrangements. Drawing from OECD’s publication, it indicates that a study on the regulatory environment of an area should not be limited to only an analysis of the regulations alone, as some studies have done, but should include the regulators as well. The International Monitory Fund (IMF) in 2004 issued a framework on good regulatory governance principles. The IMF framework focused on four characteristics: regulatory University of Ghana http://ugspace.ug.edu.gh 5 independence, accountability, transparency, and expertise. Regulatory independence, according to McCabe and Nowak, (2008), is the level of autonomy in making financial and regulatory decisions. Regulatory accountability has also been described as a mechanism by which the regulator must explain and account for its actions (IMF, 2004). Regulatory transparency is a conscious effort by the regulator to consult all stakeholders on any regulatory decisions with adequate justification for such decisions whereas regulatory expertise refers to the concept that regulators should be highly trained to enable them to pursue the regulatory agency’s goals without compromise due to their lack of knowledge (Dinar, 2000). However, in further studies done by Parker (2002), he explained that regulatory independence, accountability, and transparency were two sides of the same coin whereas regulatory expertise supported the three mechanisms. In consideration of the above factors, it appears there has been no assessment of the entire regulatory governance and taxation framework for e-commerce. Also, studies done do not offer a holistic account of the regulations in relation to e-commerce, which include the issues on security, privacy, infrastructure for e-commerce as well as taxation of e-commerce. Also, despite the statistics on internet penetration and the projected growth of e-commerce in Africa, there have been limited studies in developing countries. Current studies still focus on the challenges of e-commerce with regards to its adoption and development (Tekin et al., 2018; Khan & Uwemi, 2018) while others focus on some of the emerging business lines and products as a result of the adoption of e-commerce in Africa such as mobile money (Jack & Suri, 2011) and online sports betting (Aflakpui & Oteng-Abayie, 2016). University of Ghana http://ugspace.ug.edu.gh 6 1.3 Research Purpose Given the above discussions, this study seeks to explore the governance and taxation arrangements for e-commerce, using evidence from Ghana. 1.4 Research Objectives From the above purpose, this study specifically: 1. Examines the regulatory independence, regulatory accountability, and regulatory transparency of e-commerce, 2. Examines the level of regulatory expertise for e-commerce, and 3. Examines the taxation mechanisms and expertise for e-commerce. 1.5 Research Questions The research questions that guided the researcher in achieving the research objectives include the following: 1. What is the regulatory independence, regulatory accountability, and regulatory transparency arrangements for e-commerce? 2. What is the regulatory expertise for e-commerce? 3. How is e-commerce influencing current taxation mechanisms and expertise? 1.6 Significance of the Study The regulatory governance of e-commerce and the taxation of e-commerce has been partially carried out in separate studies with no empirical support in both instances. In view of this, this study adds to literature by resolving the gaps identified, particularly on the lack of empirical support for prior studies conducted. Specifically, this study offers a combination of the various regulatory requirements of e-commerce to have a holistic view of regulations under e- commerce. University of Ghana http://ugspace.ug.edu.gh 7 The study also seeks to offer the current tax mechanisms and expertise for e-commerce in Ghana. In addition, carrying out this study in the context of a developing country such as Ghana is a useful addition to literature as most developing countries rely on taxation for development and are equally looking for means to increase their tax bases by widening their tax bracket (Mwencha, 2019). Arguably, no study has been carried out in the context of developing countries and this study seeks to set the pace for other studies. To practice, this study offers deeper insight into the complexity of e-commerce business activities, particularly in developing countries. This is so because this study considers the principles of good regulatory governance of the regulators of e-commerce such as the regulatory independence, accountability, and expertise of the regulatory institutions. The study also sheds some light on some of the tax regulations, requirements, and challenges of taxing e- commerce. The results of the study would enable policymakers to identify and understand the dimensions of the regulatory governance of e-commerce. It also helps to identify the possible areas for improvement for regulators of e-commerce businesses, especially for businesses that lack permanent establishments in the country. Also, the findings of the study engender conversations on better approaches to regulating e-commerce businesses, especially on taxation of such businesses. This is especially important since the government is currently considering various means of widening the tax bracket to increase tax revenue bases. University of Ghana http://ugspace.ug.edu.gh 8 1.7 Scope of the Study This study explores the regulatory governance and taxation arrangements for e-commerce, using evidence from Ghana. In view of that, the study is limited to the regulatory institutions in Ghana such as the Data Protection Commission, the National Communications Authority, GRA as well as other civil society organizations and practicing firms such as PwC, KPMG, and Deloitte. This implies that only the institutions that are related to the regulation and taxation of e-commerce were involved in this study. This is so because the interaction with such organizations offers a deeper insight into some of the regulatory governance arrangements for e-commerce and helps in evaluating the level of regulatory expertise for e-commerce. It also enables the researcher to examine the taxation mechanisms for e-commerce and to identify the possible challenges in taxing e-commerce. 1.8 Organization of the Study This study is organized into five chapters. This chapter offers the background of the study, the research problem identified through the review of literature, and the gaps identified. We then identified the research purpose, research objectives, significance, and scope of the study. Chapter two reviews relevant literature under regulatory governance and taxation of e- commerce in Ghana. It covers areas such as the definition of key concepts in the study and the issues of e-commerce pertaining to privacy and security. The chapter also reviews regulatory studies carried out as well as the development of a theoretical framework applicable to the study. University of Ghana http://ugspace.ug.edu.gh 9 Chapter three, which is the methodology, explains the research paradigm, research design population, and sampling technique. It also includes the data collection and analysis approach, the reliability and validity of data as well as the ethical concern. Chapter four, which is the presentation and discussion of results, details the findings from the data gathering process. This has been categorized based on the themes that were arrived at, based on the objectives of the study as well as the outcome of the data gathering process. Finally, Chapter five - Summary of findings and conclusions, offers the summary of the findings discussed in chapter four and offers a conclusion. It also gives recommendations for future studies. University of Ghana http://ugspace.ug.edu.gh 10 CHAPTER TWO LITERATURE REVIEW 2.0 Introduction This chapter offers an in-depth review and synthesis of significant literature on regulatory governance and taxation of e-commerce businesses in Ghana. This includes, but is not limited to, the definitions of key terms identified in this study, the implications of e-commerce, and the nature of e-commerce regulation and taxation in Ghana. This chapter also considers the conceptual framework for this study. 2.1 Definition of Terms This section considers the definition of key terms within the study. Particularly, this section offers definitions of e-commerce as well as issues on e-commerce such as the issues of privacy, security, and infrastructure for e-commerce. 2.1.1 E-Commerce The term ‘e-commerce’ has no generally accepted definition. For instance, the Organization for Economic Co-operation and Development (OECD) defines electronic commerce as “business occurring over networks which use non-proprietary protocols that are established through an open standard-setting process such as the Internet” (OECD, 1999, p. 28). Coppel (2000) offers a simpler definition by defining e-commerce as buying and selling goods and services online (including payment) which may be delivered offline or can be digitized and delivered online depending on the type of product. From the definitions, e-commerce broadly covers engaging in commercial activities over the internet. However, the definition is not only limited to the above, as it includes e-businesses such as advertising products on a website, communicating electronically with suppliers and customers, University of Ghana http://ugspace.ug.edu.gh 11 and transmitting digitized products electronically (Morrison, 2001). Some of the areas that e- commerce can be found include retail, education services, manufacturing, agriculture, healthcare, and media. 2.2 Implications of E-Commerce- The Need for Regulation This section offers greater insight into the implications of e-commerce and the need for the regulation of e-commerce. Particularly, this section considers issues in the areas of privacy, and security as well as the apparent lack of infrastructure for e-commerce as indicated by literature. 2.2.1 Implications of E-Commerce: The Case of Privacy There is no general definition for privacy, the word having different meanings across various disciplines. For instance, in giving a legal definition, Warren and Brandeis (1890) defined the privacy of an individual as the right to be left alone. Privacy can be defined as the interest that individuals have in sustaining a 'personal space', free from interference by other people and organizations (Clarke, 1999). 2.2.1.1 Dimensions of privacy Privacy can be divided into three dimensions: decision privacy, information privacy, and residence privacy (Piao et al., 2016). Of the three dimensions, Shen (2013) is of the view that information privacy is central to the three dimensions. Information privacy is defined by Belanger and Crossler (2011) as the desire of individuals to control or have some influence over data about themselves. Earlier definitions of information privacy also emphasized control as being a key element concerning personal information (Mason, 1986; Culnan & Armstrong, 1999). University of Ghana http://ugspace.ug.edu.gh 12 Still, on e-commerce, the application of communication and information technologies has led to increased concerns, particularly concerning information privacy (Piao et al., 2016) since consumers are unable to control their private information from misuse by unauthorized persons or institutions. This is was earlier identified in the studies of Kelbert, et al. (2012) and Boritz and No (2011) who were of the view that there are threats to the individual privacy of users on the internet particularly in using e-commerce. 2.2.1.2 Privacy Concerns According to Culnan and Armstrong (1999), there are two privacy concerns by consumers: the risk of secondary use of personal information given for unauthorized purposes and concerns on unauthorized access to personal data due to weak internal controls and security breaches. This has been discussed extensively by Sipior et al. (2014) that some applications on phones even tend track, access the address book, identify the phone's unique identifier (UDID), as well as share data obtained with analytics companies and advertising companies. This highlights that privacy is a real issue in e-commerce. Concerning to e-commerce, privacy remains one of the key issues (Bélanger & Crossler, 2011). Personal data and browsing preferences in combination with other personal data are gathered and used to generate detailed profiles of users (Boritz & No, 2011; Desai et al., 2003; Kelbert et al., 2012). This is then shared with marketing companies that use the profiles to generate some form of personalized advertisement for the users. Such entities also store that information over a virtually unlimited period. This is usually done at the blind side of users and this raises some concerns. University of Ghana http://ugspace.ug.edu.gh 13 2.2.2 Implications of E-Commerce: The Case of Security According to Brooks (2010), security is multidimensional in nature and diverse in practice. Given this, it is difficult to have a definition that encompasses all the areas of security. Security is defined by the exclusion of quantifiable and qualifiable risks (Röhrig & Knorr, 2004). It is also understood, as “freedom from the prospect of a sudden or violent attack on one's person or property” (Rothschild, 1995, p. 62). 2.2.2.1 Security Objectives Security objectives, as explained by Abrams et al. (1995) refer to the contribution to security that a system or a product is intended to achieve. It refers to the goal that is to be achieved to attain security (Röhrig & Knorr, 2004). The classical objectives of security were identified by FIPS80 (1980). The security objectives include confidentiality, integrity, and availability. Per the explanation in FIPS80 (1980), confidentiality, refers to the protection of data from unauthorized disclosure; integrity refers to the absence of alteration of the system data and availability refers to the level of authorization in data accessibility. In recent times, however, there has been an addition to the security objectives; accountability (Röhrig & Knorr, 2004). Accountability is the confidence that communication partners are who they claim they are when communicating with communication partners. 2.2.2.2 Security Issues of E-Commerce The phenomenal growth of the internet and its commercial usage has led to an increasing need for security for both customers and merchants (Knorr & Röhrig, 2001). The lack of adequate security measures is e-commerce’s most important obstacle. Security, especially the perceived security of the internet, remains a fundamental obstacle to e-commerce (Vladimir, 1996). Tan and Thoen (2000) even agreed that no electronic system for payments of transactions online is University of Ghana http://ugspace.ug.edu.gh 14 completely secure. Swaminathan et al. (1999) also asserted that consumers may not be willing to give out information when transacting on the internet for fear that private information may be sold, thus, preventing them from engaging in e-commerce. Also, unsatisfied customers cannot get refunds for damaged goods or no delivery at all (Barkatullah, 2018). Knorr and Röhrig (2001) proposed a structured approach to analyze security measures and to quantify the overall security of an electronic business application. 2.2.3 Infrastructural Limitations of E-commerce Despite the issues identified in e-commerce, there are a lot of benefits to be harnessed from their operations. Some of the benefits of e-commerce include, but is not limited to the following: the reduction of business processes, in the long run, an increase in the quality of products, the development of new products and services, and the widening of markets for businesses (Morrison, 2001) across various jurisdictions. In addition, despite the benefits of e-commerce and its rate of growth in Africa recently, it appears that some areas must be resolved to enable Africa to harness its full potential in e- commerce. Al-Tit (2020) identified barriers to e-commerce adoption such as employee technology knowledge, telecommunications, connectivity cost, technical expertise, and technology cost. This has resulted in the inability of some e-commerce platforms to syphon out fake products and misinformation to the public (Juneja & Mitra, 2021). Tigre and O’Connor (2002) have suggested seven elements to enable Africa to exploit the full potential of e- commerce. These elements are Digital Infrastructure, Access, Literacy, Entrepreneurship, Content, and Trust, collectively referred to as DIALECT. According to their study, the benefits of e-commerce can be harnessed through the extension and upgrade of digital infrastructure using the latest digital and broadband technology. Also, University of Ghana http://ugspace.ug.edu.gh 15 granting access through affordable internet service, deregulation, and basic literacy could exploit the potentials of e-commerce in Africa. They also added elements such as the useful content of the information as well as building trust for entrepreneurs in developing countries (Tigre & O’Connor, 2002). Sarangi and Pradhan (2021) also suggested that that to build on the capacity of e-commerce, especially for developing countries, there is a need to improve R&D support, technical support, deployment of probots, knowbots, and chatbots which are powered by artificial intelligence. This is so because, with the appropriate algorithms, recommendations can be made to customers to increase e-commerce sales and enable enterprises in poverty- stricken areas to generate sufficient funds to reduce poverty and improve their well-being (Fang & Huang, 2020; Sinha & Srivastava, 2021; Wang et al., 2020). Based on the above discussion, the elements can be broadly classified under telecommunications infrastructure, competitive environment, and regulatory framework of e- commerce. By addressing these key areas, internet access will be made more affordable, thus encouraging e-commerce. 2.3 Overview of Regulatory Governance This section considers various literature on regulatory governance in general as well as offers a synthesis of literature obtained in a bid to deepen our understanding of the regulatory governance of e-commerce. This section is sub-categorized into four subsections; the concept of what regulatory governance is, the need for regulation as well as a discussion into the framework on good regulatory governance as proposed by (Das & Quintyn, 2002) and a summary of regulatory governance of e-commerce. University of Ghana http://ugspace.ug.edu.gh 16 2.3.1 The Concept of Regulatory Governance According to OECD (2011, p. 17), “regulation is of critical importance in shaping the welfare of economies and society”. It is for this reason that various governments have established regulatory institutions with a mandate to regulate specific activities that the government has an interest in. In Ahunwan’s (2002) view, such institutions were established to serve the interest of the public. To fulfil their mandate, such regulatory institutions must ensure that the institutions being regulated can provide the required service to the public. This is achieved when the mechanisms for regulating such institutions are effectively designed and implemented (OECD, 2002), with no instances of deviations or deficiencies. OECD (2013), however, identified that effective regulatory outcomes did not depend entirely on well-designed rules and regulations but rather on some elements such as rules and regulations that was efficient and effective, the quality and empowerment of institutional capacity and resources, especially in leadership, and appropriate institutional frameworks and related governance arrangements. An integral benefit of effective regulatory governance is its ability to support socio-economic development (Zhang et al., 2005), as well as to help determine what, whom, and how to regulate (Zhang et al., 2005). On the scope of regulatory governance, the OECD (2002) identified the principles adhered to in the practice of good governance as well as the effectiveness of the design and implementation of the regulator’s ability to determine the extent of the impact of the regulations on the institutions being regulated. Good governance practices in the opinion of the OECD include transparency, accountability, adaptability, consistency, and efficiency. Some identified responsibilities of regulators have been outlined, per Quintyn and Taylor’s (2003) study. They include the following: (1) the drafting of new regulations as well as University of Ghana http://ugspace.ug.edu.gh 17 amending laws that govern institutions in line with stipulated laws and regulations, (2) the ability to ensure compliance with set regulations as well as the ability to ensure enforcement of same, and (3) monitoring and reporting on regulatory processes of the institutions and their various operations. Accordingly, Cariño (2004) suggests that the practice of good regulatory governance principles greatly alleviates the occurrence of corruption and rent-seeking behaviour to contribute, to some extent, to the mitigation of challenges of an economic and social nature (Zhang, 2010). Despite the above responsibilities of regulators, there is a prerequisite to ensuring good regulatory governance – good public sector governance. Kaufmann (2002) identified the key components such as the judicial and legal system being effective, government ownership being at ‘arm’s length’, corruption being non-existent, and finally, an approach to ensure that policies that encourage competition have little possibility of undue advantage. The term ‘good regulatory governance’ is difficult to define as explained by Dias and Nwete (2004). However, a good balance of accountability, consistency, and transparency encourages an effective regulatory governance regime (Parker, 1999). Some studies, especially by the International Monitory Fund (IMF) in 2004, issued frameworks for good regulatory governance. The IMF framework focused on four characteristics: regulatory independence, accountability, transparency, and expertise. In Parker’s (2002) study, however, he explained that regulatory independence, transparency, and accountability are two sides of the same coin whereas regulatory expertise supported the three mechanisms. University of Ghana http://ugspace.ug.edu.gh 18 2.3.2 The Need for Regulatory Governance Various reasons can be attributed to the need for regulation based on the definitions of regulation. An earlier definition of regulation is given by Breyer in 1979 where regulations are defined as a set of rules, which is intended to govern, control, or conduct behaviour. Levi-Faur (2011, p. 9), also defines regulation to be “the promulgation of prescriptive rules as well as the monitoring and enforcement of these rules by social, business, and political actors on other social, business, and political actors”. This suggests that the need for regulation is to guide behaviour in a resourceful manner. Barth et al. (2003) explain that, due to the privatization of businesses, which seek to maximize profits rather than protect the interest of the public, the need for regulation of such entities is important. Thus, Shleifer (2005) identifies that the purpose of government regulations is to protect public interests. In consideration of e-commerce issues identified in earlier sections of this study, this makes the need for regulation of e-commerce necessary. From the aforementioned, there appears to be a rising need to regulate such businesses to protect users. Some regulations cover the areas of security, privacy, and taxation of e- commerce businesses. The laws vary across various jurisdictions. For example, some laws that govern e-commerce in the EU include Brussels I- for consumer protection, GDPR- for security and privacy, and eIDAS regulation and that of Ghana includes the Income Tax Act, 2015 (Act 896) and the Data Protection Act, 2012 (Act 843). Equally also, some studies have been done on the regulation of e-commerce businesses (Polański, 2018; Saraf & Kazi, 2013; Kim, 2019; Van, 2017). In Polański’s (2018) study, for instance, he considered regulations such as the GDPR and eIDAS for an assessment of the country of origin principle in the European Union. Saraf and Kazi (2013) equally looked at Brussels I as a regulatory approach. University of Ghana http://ugspace.ug.edu.gh 19 2.4 Good Regulatory Governance Framework This section offers some discussion on the areas or components of good regulatory governance which covers regulatory independence, accountability, transparency, and expertise. 2.4.1 Regulatory Independence, Accountability and Transparency 2.4.1.1 Regulatory Independence Regulatory independence, according to McCabe and Nowak (2008), is the level of autonomy in making financial and regulatory decisions. Das and Quintyn (2002) are of the view that independence from the political sphere and the supervised entities is one of the best ways of ensuring good regulatory governance, based on growing worldwide consensus, as this ensures a decreased extent of interference in the work of the regulators. One way of demonstrating the presence of regulatory independence is the existence of financial autonomy. Financial autonomy arms regulators with the confidence to carry out their regulatory activities, with no form of interference (Crocker & Masten, 1996). Litan et al. (2002) even ascribed regulatory quality to the ability of the regulator to manage its finances and its budgets. The absence of financial autonomy to determine budgets, in this regard, affects the regulator’s function of protecting the interest of the public (Tijjani, 2014). Another indicator of regulatory governance from literature is the ability to make independent decisions. This ability is key in achieving good regulatory practices (Hellman et al., 1999) and ultimately, regulatory quality (OECD, 1998; Rossi, 1999). Regulatory goals, per Lodge and Wegrich’s (2009) argument, can only be realised when regulators are independent and have no “undue intervention” in making regulatory decisions. University of Ghana http://ugspace.ug.edu.gh 20 Regulators should also have the ability to sanction businesses that fail to comply with the set regulations as this indicates their level of independence to regulate. Tijjani (2014) explains that due to the aim of private companies to be profit-oriented, they would utilize all means to maximize their gains, hence the need for regulatory agencies to protect the interest of the general public from the exploitation of such businesses. Quintyn (2007) is also of the view that one way of achieving this is to bestow power in the regulators to sanction entities that violate guidelines provided by the regulators. This is also indicated in Large’s (2003) study where he identified that the extent of the power to sanction companies by regulators had a potential impact on the effectiveness of regulatory governance. Along with the regulator’s ability to sanction business, is the need for limited interference in overruling such sanctions given to entities. Kaufmann et al. (2003) explain that regulatory governance will be rendered ineffective in the presence of interference in the regulatory process. This assertion is valid considering that undue interference ultimately affects the regulator’s ability to act independently. Kaufmann et al. (2013) also indicate the importance of regulators to have the legal backing to sanction entities without them being overruled by another institution, except for the courts of competent jurisdiction. The independence of regulators to independently recruit, deploy, promote, and discipline staff is relevant in assessing the regulatory independence of any regulator. OECD (2002) indicates that regulators have a responsibility of exercising autonomous regulatory power over the roles played by staff in a supervisory or regulatory capacity. The presence of this is relevant in achieving regulatory and policy objectives. Levine et al. (2005) in addition, describes it as fundamental for regulators to have the autonomy to recruit, deploy, promote, and discipline their staff to achieve regulatory governance. Any form of influence in this aspect could University of Ghana http://ugspace.ug.edu.gh 21 potentially affect the credibility of the regulator which could likely result in regulatory performance that does not meet expectations (OECD, 2002). 2.4.1.2 Regulatory Accountability Regulatory accountability is described as a mechanism by which the regulator has to explain and account for its actions (IMF, 2004). Das and Quintyn (2002) explained that accountability allows the regulators to justify their actions against the sole purpose for which the mandate was given to them. Regulators should provide enough justification for the factors influencing the decisions they make to the government and the general public since they have given them the authority to act in such a capacity. Das and Quintyn (2002) indicated that accountability can be achieved in the presence of measurable and defined objectives. Given that, the regulator can achieve accountability by ensuring clarity in guidelines used to obtain permits, availability to the public, and compliance with set processes. IMF (2004) indicates the need for regulators to clearly publish guidelines to be used by stakeholders to ensure accountability. To ensure adequate accountability, appropriate accounting mechanisms are to be complied with as this would ensure the attainment of good regulatory governance (Andres et al., 2008). To achieve accountability, one prerequisite is the disclosure of information by regulators (Ansell & Gash, 2008). To do so, the regulator must disclose its information to an oversight institution such as a parliament or a national assembly. This would ensure that the regulator accounts for regulatory activities over the period as well as the disclosure of other activities engaged by the regulators. Tijjani (2014) identified the communication of institutional activities to higher institutions (parliament) as one of the indicators of a presence of regulatory governance. University of Ghana http://ugspace.ug.edu.gh 22 Disclosure to the public on the nature of activities of the regulators has a potential effect on the regulatory accountability of regulators. Earlier studies indicate that disclosure is fundamental for accountability purposes (Buchanan & Tollison, 1984). IMF (2004) also indicated that although the disclosure is made to parliament or the executive, regulators should go beyond that to disclose to the public as that would enable the regulators to achieve good regulatory governance. The regulators can use various approaches to ensure that the public is well informed of their activities to promote accountability. Another way that regulators demonstrate regulatory accountability is in the disclosure of malpractices of entities being regulated. Once regulators can disclose such information to the general public, the regulated entities are kept in check and all relevant stakeholders are fully aware of the wrongful actions perpetuated by the entities. Disclosure of revenue by regulators is relevant in assessing the regulatory accountability of the regulators. Tijjani (2014) describes it as an important mechanism in accountability for regulators. Botero et al. (2004) go-ahead to identify some disclosure requirements for such regulators indicating disclosures such as justifications for any expenditure incurred as well as the level of revenue generated. Regulators must account for revenue generated in carrying out their mandated roles. This is supported by Lopez-de-Silanes and Chong’s (2002) study as they indicated that regulatory agencies should account for all revenue generated. 2.4.1.3 Regulatory Transparency Regulatory transparency is a conscious effort by the regulator to consult all stakeholders on any regulatory decisions with adequate justification for such decisions. IMF’s publication in 2004 defined transparency in regulatory policies as an environment in which objectives, University of Ghana http://ugspace.ug.edu.gh 23 frameworks, decisions, and their rationale, data, and other information, as well as terms of accountability, are provided to the public in a comprehensive, accessible, and timely manner. Das and Quintyn (2002) are of the view that increased transparency paves way for the achievement of the other regulatory governance components, which ultimately supports the credibility of the regulators. One way of achieving this is by regulators increasing the nature, timing, and extent of the level of information that is readily available to the public as well as being responsive to the public interests. Holland and Foo (2003) are of the view that the policy of the regulators should take into consideration, the opinion of various parties who have an interest in the policy in question to ensure transparency, without which consultation cannot be achieved (Stern, 2000). Rotimi and Abdul-Azeez (2013) also indicated that the degree of public input also has an impact on the legitimacy of the regulation and not only the regulatory actions of the regulators. One other component of transparency is consultations (Gilardi, 2005; Jacobs, 2004) which Baldwin et al. (2012) described as an important aspect of transparency. Tijjani (2014) believed that regulatory governance objectives can be achieved when regulators consult all legitimate stakeholders when making regulatory policies and decisions. Once consultations are done in effectively, Zhang and Thomas (2009) believe that will offer beneficial results as the regulatory process would be effective and support co-operation from all stakeholders. Another basis for ensuring regulatory transparency is the practice of ensuring transparency in regulatory activities. This covers many aspects of the regulatory process such as details of the regulator’s processes for registration and monitoring, charges in obtaining licences, and providing reasonable justification for non-disclosure to the public (Baldwin et al., 2012). This University of Ghana http://ugspace.ug.edu.gh 24 should be available on all media outlets to reach out to the public. The absence of this indicates a deficiency in the regulatory transparency of the regulator. Apart from providing general information to the public, the regulators must ensure that prospective entities that are desirous of registering or obtaining licences are fully aware of the approval process of such operations. The required documentation to be presented for application should readily be made available to them. Two-way communication should also be present for the entity to be fully aware of the progress of their applications in real-time to identify additional steps to be taken to complete the process. The effectiveness of this function can determine how business practices will best take place (Tijjani, 2014). 2.4.2 Regulatory Expertise Regulatory expertise refers to the concept that regulators should be highly trained to enable them to pursue the regulatory agency’s goals without compromise due to their lack of knowledge (Dinar, 2000). OECD (2005) indicated that good regulatory practises may be hampered in the absence of essential skills and capability by regulators. Given this, IMF (2004) recommends that regulators be highly trained as it is essential in achieving regulatory governance and better equips regulators with the requisite expertise to make regulatory decisions (World Bank, 2003). Parker and Kirkpatrick (2007) also indicate that good regulatory objectives are difficult to attain in the presence of a lack of expertise and necessary skills on the part of regulators. Baldwin et al. (2012) confirm in their study that skilled personnel contributes towards achieving better regulatory objectives. University of Ghana http://ugspace.ug.edu.gh 25 One other way of achieving good regulatory governance is the training of regulators. Duso and Röller (2003) identify training as imperative for personnel in regulatory institutions to receive the necessary training in governance and regulation. In doing so, the regulators would gain relevant expertise to develop and enforce an improved system of regulation and governance (Djankov et al., 2002). This was confirmed in Zhang’s (2010) study, as training of regulators is identified to increase good regulatory governance. Tijjani (2014) explains that for the prevention of conflict of interest and exploitation, there is also a need for a level of standard to guide the personal affairs of officials and staff of the regulators. Once the issue of conflict of interest can be put in check, the quality of operations can be promoted to maintain the integrity of operations as well as improve credibility to the world at large (IMF, 2004). World Bank (2003) also identified professionalism to be vital in ensuring consistency and reliability in regulatory governance. Overall, regulators should demonstrate some level of efficiency in their framework for regulating entities. This is so because Djankov et al. (2003) assert that in the presence of efficient and effective regulation, the objectives of protecting the public interest are better achieved through the authority granted to regulators. By determining the level of efficiency in the framework for regulating entities, one is better able to determine if the mandate for which they were established is being achieved. 2.5 Nature of E-Commerce Regulation in Ghana Some institutions in Ghana are responsible for the regulation of e-commerce especially in respect of the issues discussed in the preceding sections. The function of the institutions and the scope of their statutory authority sets the tone of the nature of regulations. The institutions University of Ghana http://ugspace.ug.edu.gh 26 identified include the Data Protection Commission (DPC), National Communications Authority (NCA), and Ghana Revenue Authority (GRA). 2.5.1 Data Protection Commission Data Protection Act, 2012 (Act 843) is the law under which the Data Protection Commission (DPC) was established. The Act was passed by Parliament as part of laws developed under the Information and Communications Technology (ICT) for Accelerated Development (ICT4AD) Policy to create an enabling legal environment for the development and use of ICT in the country (Falconer, 2017). They are an independent statutory body established with a mandate to protect the privacy of the individual and personal data. This is achieved by DPC in regulating the collection, processing, use, and storage of personal and individual information by data collectors. The DPC was inaugurated as a governing body by the Ministry of Communications in November 2012. 2.5.2 National Communications Authority The NCA was established under the National Communications Authority Act of Parliament, Act 524 of 1996. This was then repealed by the National Communications Authority Act of 2008, Act 769 to clarify the scope of communication regulation for orderly development. The NCA has several roles it plays due to the scope of work that they are mandated to do. Some of the roles include granting licenses and authorizations for the operation of communication systems and services, establishing and monitoring the quality of service indicators for operators and service providers, authorization of type approvals and enforcement of equipment standards, and finally educating and protecting consumers on telecom issues (NCA, 2019). University of Ghana http://ugspace.ug.edu.gh 27 The NCA is responsible for the enforcement of Acts which include: 1. National Communications Authority Act of 2008, (Act 769), 2. The Electronic Communications Act of Ghana 2008, (Act 775), 3. The Electronic Transactions Act of Ghana 2008, (Act 772) and 4. Electronic Communications (Rules of Procedure of the Electronic Communications Tribunal) Regulations 2016, LI 2235. (NCA, 2019). 2.5.3 Ghana Revenue Authority GRA was established as a semi-autonomous institution to replace four separate institutions; Customs, Excise and Preventive Service (CEPS), Internal Revenue Service (IRS), Value Added Tax Service (VATS), and the Revenue Agencies Governing Board Secretariat (RAGB) to achieve greater efficiency and effectiveness in the administration of taxes and customs duties in Ghana (GRA, 2019). The GRA has three core divisions; Customs Division, Domestic Tax Revenue Division, and Support Services Division to ensure efficiency in revenue mobilization as the Customs and Domestic Tax Revenue Divisions would focus on the collection of revenue whiles the Support Services Division provides the support services such as human resource and administration. The GRA is responsible for the administration of some acts which include: 1. Internal Revenue Act 2015, (Act 896), 2. Taxpayers Identification Numbering System Act 2002, (Act 632), 3. Stamp Duty Act 2005, (Act 689), 4. Internal Revenue (Registration of Businesses) Act 2005, (Act 684) and 5. Customs and Excise (Duties and Other Taxes) Act 1996, (Act 512). University of Ghana http://ugspace.ug.edu.gh 28 2.6 Taxation of E-Commerce Taxes are compulsory payments that citizens make, directly or indirectly, for services provided by the government (Smith, 1961). It is associated with income, consumption, or holding of property that individuals and corporations are required to make each year to the government. These compulsory levies could be direct or indirect, depending on key factors such as the incidence and impact of the tax payment. The incidence of taxation refers to the extent an individual or organization may suffer from the imposition of tax whereas the impact of taxation refers to the immediate result of an imposition of tax. Based on these factors that we have direct tax and indirect tax. Direct taxes - which implies bearing both the incidence and impact of taxes are levied at the source of the income while indirect taxes - which implies sharing the incidence and impact of taxes are levied at the place of destination. Taxation is important, even crucial, for development, especially for developing countries. This is because most developing countries rely on the government for substantive development. One of the ways governments raise money to support development is through taxation. Over the years, various countries have tried to increase the amount of tax collected, either by widening the tax brackets or increasing taxes in general. The OECD has even recommended reliance on taxation to ensure accountability in democratic governments (OECD, 2008). Ghana uses the worldwide income or residence-based tax system (PwC, 2017). Worldwide income describes an aggregation of a taxpayer's domestic and foreign income. Worldwide income is income earned anywhere in the world and it is used to determine taxable income. Based on that, citizens and resident aliens are subject to tax based on worldwide income and source income respectively. University of Ghana http://ugspace.ug.edu.gh 29 Apart from the worldwide basis of taxation, other countries use the source or territorial basis of taxation. As a result, taxation of a given flow of income by both source and residence countries for business income generally results in double taxation, in the absence of steps to prevent it (McLure, 2000). The previous author further explains that to avoid double taxation of business income, foreign-source income exemption and foreign tax credits (FTCs) are given, giving priority to source countries. This is usually done by residence countries which tend to decrease revenue generated when applying the worldwide tax system. Given that e-commerce businesses may still operate without physical presence, it makes it challenging for residence countries to claim such taxes generated from the gains made. Based on this, the focus will be on e-commerce businesses that do not have a permanent establishment. 2.7 E-Commerce Tax Issues Although the taxation of e-commerce appears not to be a priority for countries, there are signs that this may be so in the long run. For instance, Ghana appears to be making strives to increase tax revenues. In light of the inability to meet the revenue target for 2017, the country still raised revenue targets for 2018 and it appears various alternatives, including identifying and taxing e-commerce entities would be considered as a means of generating tax (MoFEP, 2018). Based on the above, there is a need to identify the issues in the taxation of e-commerce in literature. Broadly, taxation issues relate to consumption tax, international direct tax as well as issues surrounding tax administration (Owens, 2000). 2.7.1 Consumption Tax Issues Consumption tax issues arise when determining how to track consumption for tax purposes. This is especially so for transactions that are not limited to one country. For instance, with access to the internet and with the increasing nature of the sale of tangible and digital goods, it University of Ghana http://ugspace.ug.edu.gh 30 is almost impossible to determine the consumption tax that is payable (Hellerstein, 2002). Along with the issue of determining consumption tax payable is the issue regarding the collection mechanisms to effectively collect consumption tax. This is so because transactions involving individuals appear to be the weakest link in the chain of tax administration (Hellerstein, 2002) thus some studies have expressed that the issue of consumption taxes requires more immediacy than the issues surrounding direct taxation. 2.7.2 International Tax Issues According to Owens (2000), the international tax issues associated with e-commerce stems from the characterization of payments from various e-commerce transactions for taxation purposes. This is partly due to the vast nature of products that e-commerce covers. Also, considering the issue with clarifying the concept of permanent establishment further complicates tax assessments as its determination is crucial for tax purposes. 2.7.3 Tax Administration Issues The administrative challenges of the digital space for transactions about tax include identification, determination of the extent of activities, information collection and verification, and identification of customers (Cracea, 2013; OECD, 2015). With regards to the issues identified, the presence of e-commerce makes it difficult to identify transactions when overseas businesses sell remotely to consumers. Even more worrying is the inability to determine the nature and extent or volume of such transactions. Although tax authorities can easily have access to documents when transactions occur locally, it is not always the case for transactions that are not within the jurisdiction of the tax authorities, as e-commerce can span across various jurisdictions. This could pose a lot of issues for tax administration. University of Ghana http://ugspace.ug.edu.gh 31 Indeed, the proliferation of e-commerce has created some rift in the tax system, which is being exploited by many businesses, both locally and internationally. It has also revealed some gaps that pertain to the current tax laws. Specifically, some of the challenges identified include an increased case of Base Erosion and Profit Shifting (BEPS) and the nexus for taxation. 2.7.4 Base Erosion and Profit Shifting (BEPS) Concerning profit shifting, it involves moving profits to tax havens (Devereux & Vella, 2017) to decrease the amount of tax to be paid. Such acts are not considered to be illegal as they seek to take advantage of different tax regulations in the respective jurisdictions. Also, with the advent of e-commerce which allows businesses to operate in various countries, the opportunity to shift profit has become easier than ever (Smatrakalev, 2005). The issue with BEPS is that it undermines the tax base and potentially increases the difficulty of reaching revenue goals for countries (Coppel, 2000). In addition, corporations operating locally may face competition with multinational companies since multinationals are more likely to engage in BEPS. According to OECD, areas of BEPS opportunities include minimizing tax in the market country- achieved through minimizing the income attributable to the market or avoiding a presence liable for tax purposes, the use of intra-group contractual payments to eliminate or decrease tax in the immediate country, the avoidance of withholding tax and the reduction of tax in the country of residence through assets transfer to affiliates in low tax regimes (Englisch, 2015; OECD, 2015). University of Ghana http://ugspace.ug.edu.gh 32 2.7.5 Nexus for Taxation Although fundamentally, the act of trade has not changed, it appears the sale of digitalized products has led to transacting business on a wider spectrum, across countries and jurisdictions, of which Cracea (2013) is of the view that it challenges current international tax, particularly on the concept of permanent establishments. Although a model has been suggested by the OECD, classifying some activities as an auxiliary in determining whether or not a business is a permanent establishment has been debunked in the study of Olbert and Spengel (2017) as they argue that the determinants proposed by the OECD which specifies the criteria for not classifying a business as permanent establishments may rather be important in determining permanent establishment for tax purposes. 2.8 Taxation Mechanisms for E-Commerce Over the period, various suggestions have been given to effectively tax e-commerce businesses. Earlier suggestions range from the Bit tax and European Union E-commerce Proposal for VAT. This section explains the proposals as well as highlights the possibility of differences in the approach in taxing e-commerce in various jurisdictions. 2.8.1 Bit Tax Proposal The bit tax, proposed by Arthur Cordell, is a tax on the interactive digital traffic on the Information Superhighway as he views interactivity as a valuable exercise that is taxable (Cordell, 1997). Digital bits of information will be taxed based on its bit data flow volume, which will be collected by agents such as satellite networks, cable systems, and telecom carriers on behalf of the government. Taxation will be based on value-added to avoid double taxation. The implication of this is that it would be extremely difficult for developing countries to adopt as it involves powerful technological logistics to be able to monitor data flow to detect tax University of Ghana http://ugspace.ug.edu.gh 33 default and evasion. According to Chan (2000), the bit tax system places the burden on the agents, which in this case are the satellite networks, cable systems, and telecom carriers to collect and remit tax and which leaves room for uncertainty as to who should bear the majority of the tax incidence. Also, there may be issues in ensuring compliance by the agents and even the lack of willpower by the government to track such transactions since the consumption may not be carried out in the same country as the agent’s country (Chan, 2000). 2.8.2 European Union E-commerce Proposal for VAT The proposal by the EU suggests that the developers of e-commerce software should be required to track sales made (Kennedy, 1998). Also, since payments are usually paid online, banks are directly responsible for the deductions made from the bank accounts of the purchaser. Because of this, they suggest that the banks will withhold the amounts and pay to the government, government in turn will settle the banks for any collection costs. The implication of this is similar to that of the bit tax proposal, as it would be extremely difficult to monitor banks to ensure that they are remitting the taxes at the right value at the right time. Chan (2000), describes the proposal by Europe in taxing e-commerce as placing an undue burden on the banks, to collect and transfer tax for various governments, when they are not government agencies. Also, it leaves room for potential fraud and abuse in the handling and disbursement of tax revenues by banks (Chan, 2000). Another key argument raised was the fact that there are issues on privacy since customer information would have to be moved from the software developer to the bank to assist in tax collection and allocation to governments as well as a possibility of software developers rewriting codes to track the location of sales made for tax purposes. University of Ghana http://ugspace.ug.edu.gh 34 2.9 Theoretical Review Creswell and Miller (2000) are of the view that qualitative research does not start with a theory to test; rather, a hypothesis may arise during accumulation and analysis of information gathered which is more akin to the inductive model of reasoning. Based on their study, a theory has been identified from the review of the literature and the analysis of data gathered from respondents, and this study embraces the public interest theory to explain the regulatory governance of e- commerce in Ghana. 2.9.1 Public Interest Theory of Regulation According to Barr (1999), the public interest theory was developed by Arthur Pigou in 1932. The focus of public interest theory is on the idea that those seeking to institute or develop regulations do so in the public interest rather than the interests of groups, sectors, or individual interests (Baldwin et al, 2012). “According to public interest theory, government regulation is the instrument for overcoming the disadvantages of imperfect competition, unbalanced market operation, missing markets, and undesirable market results” (Den Hertog, 1999, p. 225), and regulatory bodies are considered to be established to represent the interest of the society in which it operates, rather than the private interests of the regulators (Held, 1970). On the regulation of e-commerce, this theory sits well with literature as instances of the issues of security and privacy have led governments to put in place regulations to protect citizens. Also, based on data gathered, Ghana’s e-commerce regulators are regarded as institutions set up by the government to protect the interest of the country and the public. Based on this, the Public Interest Theory was adopted in this study. Although some studies believed that dependence of the market mechanism alone is efficient (Arrow, 1985), Bator (1958) was of the view that this resulted in the issue of optimizing the University of Ghana http://ugspace.ug.edu.gh 35 allocation of resources and increasing the need to improve the allocation of such resources. Arrow (1970) believed that efficiency of distribution could only be achieved through government intervention- government regulation since they are presumed to be a neutral arbiter (Tijjani, 2014). In the presence of regulation, the allocation of resources is improved. This is achieved by maintaining, facilitating, and imitating market operations (Braeutigam, 1989). Given that, monitoring is done to maintain the market operations as it intended to be (Baumol, 1977). Stiglitz (1998) even considered the need for regulation to be critical as it served as a means for the interest of the public to be protected in the presence of market failure and amplifies the need for greater disclosure by businesses. Because of this, there is a greater need to protect the public, which can be achieved by regulating businesses. In the context of e-commerce, the ability of the business to easily gather information about the customer, for instance, poses serious privacy issues for customers hence the need for the regulation of such businesses to protect the customer. 2.9.2 The Application of the Public Interest Theory to E-commerce in Ghana In the presence and practice of good regulatory governance by ensuring accountability, efficiency, and following the rule of law, a country can prosper by meeting the interest of the public. Given this, this study sought to determine how regulators of e-commerce in Ghana complied with such requirements to protect the interest of the public. Masciandaro et al. (2008) are of the view that regulators should be independent of external influence and interference as it enabled the regulators to protect the interest of the public. Also, University of Ghana http://ugspace.ug.edu.gh 36 Maxwell et al. (2000) suggest that regulators ought to have the skills relevant in performing their duties and have some form of autonomy financially to be able to carry out their regulatory obligations. Ghana’s e-commerce regulatory agencies, therefore, would have to demonstrate the presence of factors indicated by Maxwell et al. (2000) and Masciandaro et al. (2008), in a bid to protect the public interest. Another application of the Public Interest Theory to e-commerce in Ghana is found in Wilson’s (1974) study, which indicates that accountability and transparency are required by the regulators to ensure that the public interest is at the core of the regulations made by the regulators. As some of the pre-requisites of good regulatory governance include transparency and accountability by e-commerce regulators. This is consistent with the application of public interest theory, as e-commerce regulations were made to protect the interest of the public. Finally, Majone (1991) argued that the Public Interest Theory intends is to protect the interest of the public which is carried out by the regulators. In consideration of the applicability to Ghana, regulators of e-commerce, specifically the DPC, GRA, and NCA, have been established with the intent of protecting the public. This makes the application of the Public Interest Theory of Regulation sit well with this study. Given the theoretical framework discussed above, the following diagram in the next section illustrates the relationship between Public Interest Theory and regulatory governance of e- commerce in Ghana. University of Ghana http://ugspace.ug.edu.gh 37 2.10 Conceptual Framework Figure 2.1: Public Interest Theory and Regulatory Governance Relationship for E- Commerce in Ghana Adopted from Tijjani (2014) This conceptual framework has been adopted from the study conducted by Tijjani (2014), based on the analysis of literature and the theoretical review. The author merged the concepts of regulatory governance and the public interest theory which is consistent with the review of the literature. The framework indicates the expectations of each party within the e-commerce framework. The consumers/public expect that the regulators would demonstrate good regulatory governance factors like regulatory independence, accountability, and transparency in their activities and also have the expertise to carry out their mandate in the interest of the general Regulators Regulations and Monitoring Independence, Accountability, Transparency Expertise Complaints Compliance Profits Quality Product Consumers (General Public) Regulated Companies University of Ghana http://ugspace.ug.edu.gh 38 public. Regulators also expect the public to report instances of issues noted in the service delivery of the regulated entities. Channels should be available for such complaints to be made. Also, the regulator should have well-designed regulations for regulated companies as well as have in place adequate monitoring approaches to monitor the activities of the companies to ensure compliance. The regulations set by the regulators are based on the expectations of the public. By having such regulations and monitoring in place, the regulated entity would have to conform, and that is aimed at meeting the expectation of the public. The public also has some expectations of the regulated entities. Entities are required to provide quality products that should be in line with the requirements of the regulators. The adoption of the public interest theory sits well with this framework since the focus of public interest theory is based on the development of regulations to protect the public interest (Baldwin et al, 2012). We see from the discussions and the framework suggested above that the public is the main subject that the regulators and the regulated entities are serving. Based on that, this framework is suitable in describing the relationship between regulatory governance and public interest theory. University of Ghana http://ugspace.ug.edu.gh 39 CHAPTER THREE METHODOLOGY 3.0 Introduction This section considers the methodology used for this study. This is going to be done by focusing on the philosophical assumptions, research design, sampling technique, inclusion and exclusion criteria, data analysis approach, the reliability and validity of data as well as the ethical stance of the researcher. Importantly also, this chapter will offer the justifications of the approaches used in this study. 3.1 Philosophical Paradigm Paradigms are explained as set of perceptual orientations and assumptions that are shared by research community members (Given, 2008). An earlier definition by Kuhn (1962) also defined research paradigm as the set of common beliefs and agreements shared between scientists about how problems should be understood and addressed. In light of these definitions, it would not be surprising to note that there are several paradigms. However, the two most common paradigms are the positivists and interpretivism (Villers & Fouché, 2015) whiles the other paradigms serve as a continuum between positivism and interpretivism. Such paradigms include feminism, critical realism, constructivism, post- positivism and post-modernism (McKerchar, 2008). While the positivists believe that there is a single reality, the constructivist believe that there is no single truth or reality, requiring the need for interpretation. The researcher is greatly influenced by interpretivism paradigm where the researcher believes that there is no single reality or truth. In view of that, interpretation would be required. University of Ghana http://ugspace.ug.edu.gh 40 Also, based on Guba’s (1990) study, research paradigms broadly encapsulate ontology, epistemology and methodology. The diagram represents how each category feeds into the other. Figure 3. 1 Research Paradigm Adapted from Hay (2000) pg. 64 and Crotty (1998) The subsequent sections offer details of the researcher’s ontology which informs the epistemology and the other aspects of the research paradigm. 3.1.1 Ontology The word ontology was derived from a Greek word which means to provide a rational account of a thing (Given, 2008). It is the philosophical science of being (Given, 2008), a supposition and claim of the real world (Blaikie, 1993). Broadly, the aim was to provide well-reasoned, deductive accounts of things that existed as it raises basic questions about the nature of reality and the human being in the world (Denzin & Lincoln, 2005). The ontological position of positivism is one of common sense or realism (Scotland, 2012; Hudson & Ozanne, 1988). That is to say, the positivist attitude is based on a realistic foundationalism ontology, thereby viewing the world independently from the researcher as well as his knowledge of the world (McKerchar, 2008). Positivists believe that the only University of Ghana http://ugspace.ug.edu.gh 41 phenomena that could produce knowledge are those which they can know through their senses, namely by, touch, taste, smell, sight, and hearing (Greener, 2008). The ontological position of interpretivism, on the other hand, is not concerned with objective reality but is rather concerned with knowing and investigating subjective realities that is specific (McKenna et al., 2011, Villers & Fouché, 2015). In view of that, Geels (2010) was of the view that the ontological position of interpretivists is based on internal realism or broadly subjective. That is to say, reality is a personal construction or an intersubjective construction which would require making sense of the world through rationalizing, justifying, creating and interpreting phenomena (Smith, 2006). In view of that, the interpretivist researcher intends to view the world through the eyes of the participants (Villers & Fouché, 2015). This opens up the interpretivist to various assessments of reality which is not possible with the positivist researcher as he believes that there is a single reality (Greener, 2008). In view of this, an interpretivist research would require that the researcher is not detached from the subject of study. The ontological position utilized in this study is that of internal realism as the researcher seeks to make sense of the world through interpreting phenomena. Also, since this study is exploratory in nature as its purpose is to explore the regulatory governance and taxation arrangements for e-commerce, it is appropriate to rationalize and interpret phenomena as there may be elements of intersubjective construction as various institutions are being considered in this study impliedly. University of Ghana http://ugspace.ug.edu.gh 42 From the diagram adopted from Hay (2000), we find that there is link between ontology and epistemology. Given the ontologies discussed, the subsequent section considers the various epistemological assumptions as well as the standpoint of the researcher on to the epistemological assumptions. 3.1.2 Epistemology Cohen et al. (2013) explained that epistemology is concerned with the nature and forms of knowledge. Scotland (2012) also explained it as what it means to know, how knowledge can be created, acquired and communicated. Epistemology asks the question, “What is the nature of the relationship between the would-be knower and what can be known?” (Guba & Lincon, 1994, p.108). For the positivist, the researcher enters the world independent of what is being researched, seeking to obtain absolute knowledge of an objective reality (Villers & Fouché, 2015). The approach used by positivists to acquire knowledge is that of empiricism, comprising of measurement and observation (Walliman, 2011). Such an approach requires deductive reasoning which is also informed by deductive logic; making the researcher move from what is known to what is unknown about a phenomenon, leading to the development of a hypothesis (Loseke, 2012). Also, the structure of the researcher’s approach could help identify connections through observations which would enable them to draw reasonable conclusions about an area of study (McKerchar, 2008; Repko, 2012). However, the epistemological position of interpretivism is that of subjectivism, grounded in actual world phenomena (Villers & Fouché, 2015). The interpretivist paradigm does not offer an explicit explanation from which connections or predictions can be made (Walliman, 2011). In view of that, an appropriate approach would require inductive reasoning which is also University of Ghana http://ugspace.ug.edu.gh 43 informed from inductive logic; starting from specific observations that is repeated and then drawing a general conclusion (Walliman, 2011). That is to say, the positivist epistemology is that of objectivism while the ontological position of interpretivism is relativism (Scotland, 2012), a view that reality is subjective and differs from person to person (Guba & Lincon, 1994). The researcher, being influenced by the constructivist paradigm also believes reality is subjective. This would, to some extent direct the researcher on the approach to be used for data gathering and analysis which would be discussed in the subsequent sections. The area that this study seeks to address also necessitates the need for subjectivism. 3.2 Research Design Research design is a plan that provides the logica