The Self Assessment Tax Filing: The Good, The Bad, The Ugly

Introduction

Some time ago in March 2017 on the way of mine to some Ghana Revenue Authority (GRA) workplace to fulfil my business income tax obligation just for the very first quarter of the 2017 year of evaluation as an instalment tax payer (i.e. for self assessment), I met my good friend Mr. Derrick Kofi Boateng who was in the typical business mode of his.

Self Assessment Tax Filing

Upon understanding the reason of mine for going to the GRA business office, he shouted “Oh maasa” and started laughing, that had been extremely loud that almost everyone in work turned to take a look at us. Suddenly he stopped and said,

“But wait oooo… just how can you be spending tax today once the 2017 year of evaluation hasn’t actually ended? exactly how did you understand how a great deal of tax to pay when GRA is still to identify the tax payable? And will it mean you won’t spend tax once again once the 2017 year of assessment ends?”

These days it had been the turn of mine to laugh too, however, not that loud to draw in people’s attention. I’m a lot convinced that the majority of taxpayers are unaware of this because the Tax Authorities haven’t widened their tax training to add several of these problems that is stipulated in the Income Tax Act 2015 (Act 896) as amended.

What’s self assessment?

Self-assessment just describes a circumstance in which a taxpayer estimates the amount income he/she expects making in any season of assessment. According to these kinds of estimates, the taxpayer decides the tax payable & submits very same to the Commissioner General in the type recommended for this kind of uses for account. It’s acceptable to be aware the Commissioner General might however base on pertinent info as well as conditions offered to him refuse the estimates published by a taxpayer if in the opinion of his the self assessment is outrageous

The Income Tax Act 2015, (Act 896) as amended requires taxpayers to file tax estimates for the entire year to the GRA as well as establish the quantity of tax being paid out, dependent on the own assessments of theirs. The estimates are then split into 4 and payments made at the conclusion of every quarter. According section 121 (one), an instalment payer shall spend tax by quarterly instalment when anyone derives and expects to derive assessable earnings during a season of assessment. The GRA within employing the self-assessment method might not expect hundred % accuracy and consequently allows a ten % margin of error, the last declaration must be no less than ninety %.

Due date of self assessment rewards is actually by the day for the transaction of the very first tax instalment i.e. in case the basis phase of yours begins from January to 31st December, then you’ve as much as 31st March to file the estimates of yours for every season of assessment.

The Good

  • The provision encourages self compliance that is a significant element for tax revenue mobilization
  • The Act seeing the dynamics in company operations during a season of assessment makes provision for taxpayers to set and revise presently posted estimates. Section 122(5) allows a taxpayer to file a revise estimates together with the Commissioner-General together with a declaration of reasons for the modification. Nevertheless, 122(6) calls for the modified estimates must simply be for the objective of calculating installment’s payable after the day the modified appraisal is filed with the Commissioner General.
  • The Government is additionally able predict the tax revenue of its with some amount of certainty in case this self-assessment is absolutely followed.
  • Government can also make use of this to widen the tax web particularly those not that are not self or provisionally evaluated.
  • It likewise assists businesses in their tax preparation methods whiles strengthening its budgetary command i.e. to make use of pertinent tax benefits.
  • It can also help to companies to eliminate monetary inefficiencies i.e. unnecessary and unbudgeted expenses are eliminated or stayed away from.
  • Additionally, it allows an entity to guarantee effective cash flow and working capital management i.e. the expertise of being forced to make quarterly tax payments places an enterprise in a much better place to control the cash flow of its to meet up with these payments as it goes thanks.
  • A company’s tax burden is generally reduced in the conclusion of the entire year of evaluation because you do not need to wait until end of year to create a bullet transaction. Several businesses actually wind up with tax credits as a result of over payment.

The Bad

  1. When a default in filing estimates as stipulated in the Act, the Commissioner General is empowered to estimate for the taxpayer foundation- Positive Many Meanings – on the pertinent info offered to him. Section 123(3) stipulates that “For the purposes of area 121, the estimated tax payable by the individual for the entire year of evaluation is the total amount approximated by the Commissioner General. Think of the GRA making estimates for yourself? The guess of yours is just like mine.
  2. Despite the possible effectiveness of cash flow and working capital management, an enterprise in financial distress will discover it hard to increase the appropriate cash flow to satisfy the tax payment when it falls thanks.
  3. With the initial release of dollars paying taxes, there’s a possible denial of potential buy as money which could were utilized for practical outlay is paid upfront to settle tax obligation.
  4. Unlike the promptness as well as rate with which GRA expects taxpayers paying taxes when due, the exact same isn’t used whenever a taxpayer is requiring for a tax credit or perhaps refund. A taxpayer is going to have to go through many system to confirm the claim and quite often be subjected to tax review to verify claim.

The Ugly

Probably The ugliest points together with the self-assessment filing is available in 2 forms: failing to file understating as well as estimates of the estimates.

As suggested, a failing to file for self assessment implies that you’re indirectly asking the GRA to let you know exactly how a great deal of cash flow you plan to create as well as the tax payable for the entire year of evaluation as per stipulated by area 123(3)

Additionally, an individual that understates the estimate of his or even revised appraisal shall be likely paying interest at 125 % of Bank of Ghana (BOG) discount price of the tax unpaid for the time period that the tax is exceptional compounded monthly particularly the place that the under declaration have been wilful.

The Ghana Revenue Authority may also go to taxpayer’s premises to audit the estimates as well as declarations that’s been posted to it to be able to confirm what have been posted. In which a taxpayer is discovered to possess been untruthful in his or maybe the declarations of her, sanctions like prosecution in the law court is going to be put on.

Conclusion

The conclusion of mine is quite of a query compared to a suggestion; Is GRA ensuring complete compliance of the provisional plus self evaluation provisions in the Income Tax Act by taxpayers? or maybe as a corporate entity have you been taking the lead to understand GRA of just how much tax you plan paying or perhaps you need GRA to figure out that for you?