Charles Takyi-Boadu
16 April 2008
Months of investigations into the activities and operations of the Internal Revenue Service (IRS) has revealed underhand dealings and deliberate cover-up of a massive tax evasion by high-ranking officials of the revenue-collecting agency.
At the centre of the raging controversy is the Commissioner himself, Major Daniel Ablorh-Quarcoo (Rtd), at whose 'discretion' the nation is losing several billions of cedis.
An audit report commissioned by the Commissioner, covering the period of December 31st 2002-2006, into the books of Golden Gate Services limited, a private Stevedoring company, based in Tema, has revealed that the company owed the state to the tune of approximately ¢29billion in tax and penalty liabilities.
A copy of the audit report dated December 23rd 2007, and signed by the Deputy Commissioner In-Charge of Special Duties, D.T Acquaye, for the Commissioner, which is in the possession of The Chronicle, reveals massive tax evasion.
The audit report revealed that the company had underestimated its income to the IRS by a whooping amount of ¢42billion.
It therefore decided to include it in its revised tax computation for the respective years.
For the same period, the IRS noted differences in the company's Direct Cost in the areas of stevedore gear, plant hire expenses, repairs and maintenance, and miscellaneous, whilst it added back items under-listed under General and Administrative expenses which amounted to over ¢17billion.
This included foreign travels, telephone, marketing research, post and telecommunications, software expenses, safety and security.
The rest were in the areas of fuel and lubricants, travel and transport, electricity and water, bank charges, interest, fines and penalty.
In the case of Deferred Liabilities, the IRS said it was not provided with documentary evidence in support of the company's indebtedness to its Directors.
Though the money was supposed to have been paid to the Directors of the company, the Chronicle investigations revealed that there was no evidence to show that any of the Directors received the money. Sources have indicated that the company did not owe any of the Directors as the impression is being created.
The IRS was therefore unable to accept the liabilities of an amount of over ¢24billion as stated in the financial statements for the years under review. For this reason, it resolved to adjust and include it in its tax computation.
Much as the IRS agreed to the fact that in every business operations, there are some public relations, it noted in its report that "we are uncomfortable with the practice whereby at the end of the year, a huge portion of the expenditure is written-off to Suspense Account, and only relatively small portion is shown in the financial statements."
It was therefore compelled by prevailing circumstance to add back to profit, the write-offs in the years 2005-2006, which amounted to over ¢2billion.
Though the revenue collecting agency had no evidence of the company's Directors recommending the payment of Dividend in 2005 and 2006, available records indicated that the payments were made as Dividend to the tune of over ¢2billion.
The IRS thus imposed a 300% penalty for non-disclosure with a 10% tax, all amounting to over ¢1billion.
Further, the IRS detected an overstatement of the company's Salaries and Wages account in 2005, by over ¢373million and included it in its tax computation. Since the said account did not suffer tax, the IRS decided to subject same to tax at a marginal rate of 5%.
Contrary to the provisions of sections 3 and 83 of the Internal Revenue Act 2000, Act 592 as amended, Golden Gate Services limited failed to withhold taxes on payment for services rendered by third parties.
For that matter, the IRS computed the appropriate withholding taxes amounting to over ¢229million and added same to the company's tax liability in accordance with Section 88 of the Internal Revenue Act 2000, Act 519 as amended.
After the auditing, Golden Gate Services' total tax and penalty liability payable stood at approximately ¢29billion.
An interim audit report cited by The Chronicle and dated November 9th 2007, indicated that the company's tax and penalty liability was over ¢41billion but was later scaled down after final report.
In order to have its operational license renewed, the Ghana Ports and Habours Authority (GPHA) asked the company to settle the indebtedness of its tax liability for the years under review.
Meanwhile, the company has been dragging its feet in settling its indebtedness to the state.
In the heat of events, Golden Gates Services, whose operational license was about to expire, applied to the IRS for a Tax Clearance Certificate.
The IRS thus gave the company a binding-condition to pay at least ¢3billion out of the total amount it owed the state by March 2008, in order to be issued the Tax Clearance Certificate.
Though the company has since failed to comply with the IRS's directive, the Commissioner used his 'discretion' to issue the company with the said Tax Clearance Certificate.
Meanwhile, some of the cheques issued by the company bounced, when they were presented for payment-an offence under Section 149 of the Internal Revenue Act 592 of 2000.
Though the IRS keeps imposing penalty after penalty on the company for the issuance of bounced cheques, it has made virtually no effort to recoup the outstanding debt that Golden Gate Services owes the state.
Since the company has not been able to pay ¢3billion out of the total amount within the period of December 2007 to date, it is not clear how it would be able to settle the outstanding amount which runs into ¢29billion, an action Mr. Ablorh-Quarcoo has strongly defended, since according to him, he is mandated by the constitution to use his 'discretion' to grant such reliefs.
The use of 'discretionary' powers by the Commissioner thus appears to be overriding the supreme interest of the state, though he is mandated by the constitution of the Republic to serve the interest of the nation.
The situation has heightened the belief that the company is enjoying some form of preferential treatment from the IRS boss.
This is believed to be part of reasons why among all the revenue collecting agencies, only the IRS could not meet its target last year.
The Chronicle is privy to the fact that the Minister of Finance and Economic Planning, Kwadwo Baah Wiredu, has personally instructed the IRS Commissioner to expedite action in recouping such huge losses to the state.
The Minister became alarmed when this reporter informed him of the monies involved, obviously due to the fact that the IRS could not achieve its target in the year 2007.
In spite of this, the paper can report on authority that there is very little or virtually no effort being done to recoup these monies.
The Commissioner, Ablorh-Quarcoo, told this reporter that he has given the company between 6-8months to settle its indebtedness.
He was, however, not forthcoming with information of the possible action that he and the IRS would take if the company failed to pay the said amount within the period.
His subordinate, the Tema District Manager of IRS, Kwasi Twum-Barimah, has also refused to comment on the issue since according to him, it was beyond his level.
Though company sources have told The Chronicle that the monies involved were duly deducted from the company's accounts, it is not clear who and where those monies were paid to.
However, the Chief Executive Officer of the company, Bennet Aboagye, and Rudolf Engmann, Commercial and Administrative Manager have denied any wrongdoing.
They raised questions about the figures quoted by the IRS, saying it was extremely outrageous for the company to owe such huge amounts.
According to them, not even the GPHA can owe the IRS to that tune, let alone a single stevedoring company such as Golden Gate Services.
For that matter, they have petitioned the IRS to review the audit it conducted on the company, since in their opinion, the report was far from reality. More anon.
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