Viewpoint: George Kwatia
Tax compliance is central to the government’s agenda in 2019. The minister of finance indicated in the 2019 budget that the government would focus its revenue mobilisation efforts on reforming revenue institutions, intensifying compliance measures and broadening the tax net. However, we must work towards ensuring that compliance is less burdensome for taxpayers, particularly the processes of collecting and maintaining financial data for the regulation of tax compliance purposes. The legal framework for taxation in Ghana is not particularly complex, and there are relatively fewer provisions compared to many developed economies. The documented administrative guidelines are also less cumbersome. Complications result instead from issues that remain unaddressed by the tax regime, so taxpayers and the Ghana Revenue Authority (GRA) will need to make some procedural adjustments to accommodate these practical needs. We call these procedural adjustments “practice”. This involves additional procedural requirements placed on taxpayers by the GRA in order to complete administrative procedures, or drawn from the GRA’s acquiescence with respect to some procedures completed or omitted by taxpayers which are not necessarily backed by law. Over time, the practice becomes irrefutable and forms a set of laws that taxpayers are ordinarily required to follow, or take advantage of, but are not immediately obvious. To be tax compliant, a taxpayer should set out to adequately comply with both the law and the practice even though, admittedly, the law takes precedence.
From client service experience, early tax conversations by investors usually focus on entry and exit plans, and to a lesser extent, operations. Indeed, the conversations that do concern operations focus more on tax leakages than on compliance. However, when it comes to compliance, the onus of proof of having duly complied is on the taxpayer. The requirements of compliance are increasing both local and global, but the allotted time for making these reports is decreasing, and compliance is growing in importance. To illustrate, the average tax payer will have to complete between two and four separate value-added tax returns depending on the scale and nature of operations. The problem is not just the number of returns, but also knowledge to decide the ones that need completing, noting the circumstances under which these requirements will change and remembering the timeline for each return, as several exist. After preparing and lodging tax returns there is an audit process that requires the tax payer to revisit the underlying financial data and thus to prove that the figures are correct. This interdependency proves that the demands of tax compliance can be better managed if tax is treated as a critical component of the finance and accounting function.
Making tax processes and obligations a critical component of the finance function from the start helps bring to the fore the requisites for effective tax compliance so that the average individual can be made responsible for tax compliance processes. Strong collaboration between tax staff or consultants and finance teams enables the identification of potential issues and opportunities, a sound duty to address issues and take advantage of opportunities to meet the compliance requirements, increased efficiencies and improved risk management. A key part of any tax compliance process is tax audit defence. Keeping information used to prepare tax returns reconciled to financial reports gives any business a better chance at winning arguments against tax audit assessments and ensures that the business tax audit is complete.
Regardless of an establishment’s approach to executing its tax activities, the need for quality financial data for preparing tax results and the need to keep tax data reconciled to financial information makes it important for businesses to plan the needs of the tax and finance functions together, which is the starting point for minimising the challenge of tax compliance.
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