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Introduction
A while in the past in March 2017 on my technique to a Ghana Income Authority (GRA) workplace to fulfil my company revenue tax obligation for the primary quarter of the 2017 yr of evaluation as an instalment tax payer (i.e. for self-assessment), I met my good good friend Mr. Derrick Kofi Boateng who was in his regular enterprise mode.
Upon realizing my purpose for visiting the GRA workplace, he shouted “Oh maasa” and began laughing, which was so loud that just about all people within the workplace turned to take a look at us. Instantly he stopped and mentioned,
“However wait oooo… how will you be paying tax now when the 2017 yr of evaluation has not even ended? how did you understand how a lot tax to pay when GRA is but to find out the tax payable? And does it imply you’ll not pay tax once more when the 2017 yr of evaluation ends?”
Now it was my flip to snicker too, however not that loud to draw individuals’s consideration. I’m very a lot satisfied that almost all taxpayers are blind to this as a result of the Tax Authorities haven’t widened their tax training to incorporate a few of these points which is stipulated within the Revenue Tax Act 2015 (Act 896) as amended.
What’s self-assessment?
Self-assessment merely describes a scenario the place a taxpayer estimates how a lot revenue he/she expects to make in any given yr of evaluation. Primarily based on such estimates, the taxpayer determines the tax payable and submits identical to the Commissioner-Normal within the kind prescribed for such functions for consideration. It’s worthy to notice that the Commissioner-Normal might nevertheless base on related circumstances and knowledge out there to him reject the estimates submitted by a taxpayer if in his opinion the self-assessment is outrageous
The Revenue Tax Act 2015, (Act 896) as amended requires taxpayers to file tax estimates for the yr to the GRA and in addition decide the quantity of tax to be paid, based mostly on their very own assessments. The estimates are then divided into 4 and funds made on the finish of each quarter. In accordance part 121 (1), an instalment payer shall pay tax by quarterly instalment if the individual derives or expects to derive assessable revenue throughout a yr of evaluation. The GRA in using the self-assessment methodology might not anticipate 100% accuracy and subsequently permits a ten p.c margin of error, the ultimate declaration ought to be at the very least 90 p.c.
Due date of self-assessment returns is by the date for the fee of the primary tax instalment i.e. in case your foundation interval begins from January to thirty first December, then you’ve gotten as much as thirty first March to file your estimates for every year of evaluation.
The Good
• The supply encourages self-compliance which is a significant key for tax income mobilisation
• The Act realizing the dynamics in enterprise operations throughout a yr of evaluation has made provision for taxpayers to regulate or revise already submitted estimates. Part 122(5) permits a taxpayer to file a revise estimates with the Commissioner-Normal along with a press release of causes for the revision. Nevertheless, 122(6) requires that the revised estimates ought to solely be for the aim of calculating instalments payable after the date the revised estimate is filed with the Commissioner-Normal.
• The Authorities can also be in a position predict its tax income with some extent of certainty if this self-assessment is strictly adopted.
• Authorities may additionally use this to widen the tax internet particularly these not who will not be self or provisionally assessed.
• It equally assists firms of their tax planning methods whiles strengthening its budgetary management i.e. to reap the benefits of related tax advantages.
• It additionally helps to firms to eradicate monetary inefficiencies i.e. unbudgeted and pointless bills are eradicated or averted.
• It additionally helps an entity to make sure environment friendly cashflow and dealing capital administration i.e. the information of getting to make quarterly tax funds places an organization in a greater place to handle its cashflow in order to satisfy these funds because it falls due.
• An organization’s tax burden is often lessened on the finish of the yr of evaluation as you do not have to attend until finish of yr to make a bullet fee. Some firms even find yourself with tax credit because of overpayment.
The Dangerous
• When a default in submitting estimates as stipulated within the Act, the Commissioner-Normal is empowered to estimate for the taxpayer base on the related data out there to him. Part 123(3) stipulates that “For the needs of part 121, the estimated tax payable by the individual for the yr of evaluation is the quantity estimated by the Commissioner-Normal. Think about the GRA making estimates for you? Your guess is nearly as good as mine.
• Regardless of the potential effectivity in cashflow and dealing capital administration, an organization in monetary misery will discover it tough to boost the related cashflow to satisfy the tax fee as and when it falls due.
• With the upfront launch of money to pay taxes, there’s a potential denial of future funding as money that might have been used for viable funding is paid upfront to settle tax obligation.
• Not like the promptness and pace with which GRA expects taxpayers to pay taxes when due, the identical isn’t utilized when a taxpayer is requesting for a tax credit score or refund. A taxpayer must undergo a sequence of course of to validate the declare and generally be subjected to tax audit to verify declare.
The Ugly
The ugliest issues with the self-assessment submitting is available in two varieties: failure to file estimates and understating of the estimates.
As indicated, a failure to file for self-assessment means that you’re not directly asking the GRA to inform you how a lot revenue you anticipate to make and the tax payable for the yr of evaluation as per stipulated by part 123(3)
Additionally, an individual who understates his estimate or revised estimate shall be liable to pay curiosity at 125% of Financial institution of Ghana (BOG) low cost charge of the tax unpaid for the interval for which the tax is excellent compounded month-to-month particularly the place the under-declaration has been wilful.
The Ghana Income Authority may additionally go to taxpayer’s premises to audit the estimates and declarations that has been submitted to it with the intention to confirm what has been submitted. The place a taxpayer is discovered to have been untruthful in his or her declarations, sanctions together with prosecution on the regulation court docket will probably be utilized.
Conclusion
My conclusion is quite of a query than a suggestion; Is GRA guaranteeing full compliance of the provisional and self evaluation provisions within the Revenue Tax Act by taxpayers? Or as a company entity are you taking the result in inform GRA of how a lot tax you anticipate to pay otherwise you need GRA to find out that for you?
Let’s meet to debate this within the tax class!
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Source by Desmond Aidoo