Liberia: What Tax Payers Should Do When They Cannot Meet Their Tax Obligations

26 August 2019
opinion

A Tax Payer has not committed any crime merely because he/she cannot afford to pay his/her taxes.

A crime is committed, when the Tax Payer fraudulently conceal assets or otherwise conspire to beat the government out of its taxes.

The Collection and Enforcement Division of the Liberia Revenue Authority (LRA) has enormous legal powers to collect past due taxes.

The LRA as debt collector is tougher than any other debt collector a Tax Payer may ever be likely to face.

The Collection and Enforcement Division of the LRA at times may not need a court order or judgement before closing down a business.

In some cases, the Collection and Enforcement Division only has to send a demand letter before it acts. In some instances the Division may act without giving any warning.

The Collection and Enforcement Bureau can close a business down by padlocking the doors.

The best way to approach the situation of delinquent taxes is to respond immediately to all notices requesting payments that emanates from the LRA.

One critical thing to remember if a tax payer is behind on taxes and want to stay in business, is to keep in constant touch with the LRA regarding the tax owed.

The worst thing a Tax Payer can do to himself / herself when he / she is delinquent in payment of taxes, is to stay away from the LRA.

The LRA may leave the Tax Payer alone for a while, but usually not for long. Based on the facts and circumstances involved, the LRA may be willing to enter into an installment payment agreement for outstanding taxes.

In most instances such installment payment agreement would require a down payment, followed by monthly payments over specified months.

Failure to honor the installment payment agreement may lead to closure of a business.

Making installment payments does not preclude a Tax Payer from honoring and on time all current taxes.

The best time to enter into an installment payment agreement with the LRA is at the time of receipt of the tax bill / notice.

If the Tax Payer fails to work out an arrangement when the notice is received, it is highly unlikely for a part payment agreement to be accepted by the LRA.

Page 2 Benefit of Tax Installment Payment Arrangement.

Entering into an agreement to pay outstanding tax obligations over a number of months is a sure way of buying extra time from the Tax Enforcement Division of the LRA in order to raise the money.

The LRA may ask a Tax Payer who is requesting permission to pay tax obligations in installments over a period of time, to submit a set of financial statements.

If the financial statements show that the Tax Payer own assets that could be disposed of , the Tax Enforcement Division may request that the assets be sold.

By requesting for an installment payment agreement, a Tax Payer may be able to gain time to collect enough money to pay the tax bill without having to sell assets that would rather be kept.

To be sure of getting the LRA into agreeing to enter into an installment payment agreement, it is advisable for the Tax Payer to be prepared to pay at least 30% of the bill immediately and the balance in equal payments over two or three months.

Assured Accepted Payment Technique The Enforcement Division of the LRA holds the four aces in negotiations with taxpayers who are delinquent in their tax payments.

A simple technique may be used by Tax Payers to gain some bargaining power against the LRA. For Instance, a taxpayer owes the LRA US$30,000.00 in taxes.

The Taxpayer's Accountant / Tax Adviser walks into the Income Tax Division of the LRA with US$10,000.00 check made payable to the Internal Revenue Account for a down payment and the balance to be paid in two or three monthly installments.

A high percentage of up-front payment has real impact. Remember that the LRA's performance is measured by the amount of taxes collected in a period of time.

The Domestic Tax Commissioner may not want the opportunity of making revenue of US$10,000.00 with an assurance to collect US$20,000.00 within two to three months slip through his fingers.

Page 3 When a Tax Payer's delinquent tax case is turned over to the Collection and Enforcement Division, enforcement action in most instances will start after the taxpayer has failed to respond to series of letters from the Collection and Enforcement Division requesting payment.

A Tax Payer may really get into trouble with the LRA if the Tax Payer completely ignores the communication letters from the Division requesting payment.

Remember

Creditors have better memories than Debtors.

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