Ghana Revenue Authority has embarked on comprehensive reforms geared towards “Voluntary Tax Compliance”. Among the reforms include requesting tax payers to determine their tax liabilities and consequently the tax payable. This has roundly been criticized by some taxpayers as increasing cost of compliance or doing business. You have been engaged by the Ministry of Finance to help Ghana Revenue Authority educate taxpayers on these reforms.
You are required to explain to taxpayers:
i) Self Assessment Tax Regime. (4 marks)
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Self assessment regime is a type of assessment regime where a taxpayer is made responsible for accurately computing and reporting their tax liability. The taxpayers are required to estimate their taxable income and the tax thereon for the year of assessment. Tax payers on self assessment may file revision of their estimates and pay taxes in accordance with section 80 of the Internal Revenue Act 2000 Act 592 accordingly.
i. Persons on self assessment are persons specified in a notice published in the Gazette or in a print media by the Commissioner General.
ii. An estimate furnished under a revised estimate to the Commissioner General shall remain in force until revised by the person together with a statement of reason for the revision.
iii. Where the Commissioner General is not satisfied with the estimate or revised estimate, the Commissioner General may set aside the estimated assessment and provisionally assess the person.
iv. Under section 144 of the Internal Revenue Act, 2000 Act 592, where a person on self assessment makes an estimate or a revised estimate of chargeable income less than 90% of the persons actual chargeable income assessed for that year is liable to pay a penalty equal to 30% of the difference between the tax calculated in respect of that person’s estimate or revised estimate of that person’s actual chargeable income for the year.
v. Under section 48 of Internal Revenue Regulations, 2001 (LI 1675), the Commissioner General may permit a person to furnish an estimate prior to the date by which the person must pay the first installment of tax payable. (4 marks for any 4 points)
ii) Critically examine the benefits taxpayers stand to derive from Self-Assessment Regime that has become part of tax administration in Ghana. (6 marks)
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The benefits include but not limited to the following:
i. The taxpayer is given the opportunity to make the estimate which engenders trust. This makes the taxpayer confident of the system and helps them own their tax affairs.
ii. The tax payers know their personal circumstances and can make a better estimate under no duress. The taxpayer makes estimate which reflect their operations. However, it may also lead to low estimate at the early stage of the taxpayer’s business which will cripple government’s ability to raise enough revenue.
iii. The Taxpayers is at will to revise estimates so as to avoid any imposition of penalty as the circumstances of their businesses will dictate. This makes taxpayers to pay huge taxes at the last quarter as against earlier quarters.
iv. It reduces cost of doing business as it does not engender objection to provisional assessment which is very common under a provisional assessment regime. On the part of the business, cost increases as taxpayers will have to engage tax experts to help out.
v. It builds the technical skill of the taxpayers over the period. As the taxpayers furnish these returns over the years, they begin to appreciate the technicalities involved in the tax administration.
vi. It promotes healthy interaction between the taxpayers and the Ghana Revenue Authority. There is always constant engagement between the taxpayers and tax administrators.
vii. It promotes accurate record keeping by the taxpayers. The self assessment thrives on proper record keeping.
(6 Marks for any 6 points)