Timely filing of tax returns: Effects on revenue mobilisation
At the end of April, it is expected that persons who have registered their businesses with Ghana Revenue Authority (GRA) will file their expected returns by the due dates with the institution.
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GRA is expected to rake in GHȼ 106 billion for the 2023 Year of Assessment and as at the end of the first quarter of 2023, its target was exceeded, which is surprising because at the beginning of the year, most businesses do not perform so well and they do much better in the subsequent quarters, especially the last quarter.
Filing returns on time enables the GRA officials to check and ensure that the returns are in the form prescribed by the Commissioner-General and also to pursue the collection of taxes not-in-dispute.
This helps to raise additional tax revenue, which ultimately helps GRA to exceed the target set for it by the Finance Minister.
There are various types of returns that taxpayers file with GRA and some of them are filed monthly, quarterly and yearly.
Concerning self-assessment, the initial return is supposed to be filed with GRA by the end of the first quarter based on the basis period of the person, and a person can file a revised one as often as possible until the basis period ends.
For example, a person whose basis period is July 1 to June 30 is required to file the initial assessment by September 30 and can be revised as often as possible before and, including June 30.
Most businesses have an accounting period beginning January 1 to December 31 and so the due date for filing the self-assessment is March 31.
The ones filed monthly include employee taxes (Pay–As–You–Earn), withholding taxes, Value–Added Tax, and Communication Service Tax (CST).
With regard to returns filed every quarter, persons engaged in petroleum operations file that.
Returns that are filed annually include audited financial statements, employer’s annual tax deductions schedule, personal income tax returns, Income tax form 51 (Annual), and transfer pricing return form.
Return of Income
Section 124 (1) of the Income Tax Act, 2015, Act 896 stipulates that “Subject to Section 125, a person shall file with the Commissioner-General not later than four months after the end of each year of assessment a return of income for the year”.
This means that the returns expected to be filed annually must be filed by April 30 for persons whose accounting period ends on December 31 and for those whose accounting period differs from January 1 to December 31, the return has to be filed within four months after the end of their basis period.
For example, if the basis period or accounting date is April 1 to March 31, the returns have to be filed no later than July 31.
Section 125 of Act 896 stipulates that “Subject to subsection (2), a return of income for a year of assessment is not required under Act 924 which mentions (i) a resident individual who has no tax payable for the year and (ii) whose tax payable for the year under Section 1 (1) (a) relates exclusively to income from employment subject to withholding under Section 114; or a non-resident person who has no tax payable for the year under 1 (1) (a).
This means that an employee who earns income from only one source of employment for which employee taxes have been withheld and paid to GRA does not have to file a return. However, if the employee earns income from other sources, he/she is required to file a return.
Despite subsection (1), the Commissioner-General may serve a notice in writing on a person specified in subsection (1) requiring that person to file a return of income and this is in accordance with Section 125 (2) of Act 896.
A person not required to file a return may elect to do so and this is in accordance with section 125 (3) of Act 896.
The return is expected to be in a form prescribed by the Commissioner-General in accordance with Section 124 (2) of Act 896.
Section 28 (1) of the Revenue Administration Act, 2016, stipulates that “A tax return to be filed by an individual shall be signed by the individual and shall have a declaration to the effect that the return is complete and accurate.
However, a tax consultant or any other person that has been authorised by the entity can sign the return form on behalf of the person in accordance with section 28 (2).
Failure to file tax returns on time
Due to certain circumstances or factors, a person may not be able to file the return on time.
Examples of these circumstances are the death of a director who is a signatory of the business and the loss of documents which are required to prepare the financial statements for auditing by external auditors.
Under such circumstances, the person can apply to the Commissioner-General for an extension to file the returns.
The application must spell out the reason for the request for the extension and if the reason is accepted by the Commissioner-General, an extension is granted for up to 60 days after the due date.
This is in accordance with Section 30 (5) of the Revenue Administration Act, 2016.
However, the granting of the extension does not alter the date for payment of tax as specified in the tax law under which the return is to be filed.
This implies that there must be adequate provision for the person to determine the tax payable even though the return cannot be filed on time and this poses a big challenge to persons because of the difficulty in determining the tax payable when the financial statements have not been audited.
Section 31 (1) of the Revenue Administration Act, 2016, stipulates that “Where a person fails to file a tax return by the due date required by tax law, the Commissioner-General may, for the purpose of Section 35, appoint another person to prepare and file any information that the Commissioner-General may require, including information required by the return.
Failure to file returns on time leads to the imposition of penalties and the amount is GH₵ 500 initially and an additional GH₵10 a day for which the return is not filed. In addition, where there are tax payments involved, interests are computed and the person is surcharged.
Effects of timely filing of returns
Timely filing of returns helps in mobilising domestic tax revenue through the following means:
a. Taxes not in dispute can immediately be collected to maximise revenue mobilisation - When returns are filed in the manner prescribed by the Commissioner-General, it enables him/her (Commissioner-General) to know the tax payable and pursue the collection of outstanding taxes if any.
b. Desk auditing of the returns will help to determine any anomalies in the tax and capital allowance computations which may result in additional taxes being discovered and this boosts the collection.
c. Withholding taxes involved in the returns helps the Commissioner-General to know persons who operate businesses but are yet to register with GRA and assess them accordingly. The result is that the tax net is widened and assessments can be raised on such persons.
For example, rent paid to a landlord/ landlady makes the tax office get information about the owner of the property.
I expect that the Commissioner-General will educate from time to time, persons that are expected to file their returns so that they file them by the due dates. This will lead to an increase in tax revenue mobilisation, which will lead to the economic growth and development of Ghana.
The writer is a tax consultant
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