Introduction
There is a general maxim that two things are certain in life; taxes and death. This is not limited to individuals but corporate entities as well. Governance of corporate entities are done through policies and procedures, not only for the internal running of the entities but also how it relates to the external environment and its stakeholders, including government and its agencies. The policies are written and approved by the Board of Directors for the implementation by the management team of those organizations to make smooth the day-to-day operations. In my recent interactions with corporate representatives during "Managing Tax Compliance Risks" Training Workshop, it became clear that most corporate standards of operations procedures (SOPs) do not have tax compliance policies to guide their operations, though some have generic statements about tax expense in their financial reporting.
Causes & Sanctions
What could be the possible reasons? The reasons for this could stem from various angles such as treating tax as an after-thought item of expenditure, because organizations know that the percentage to charge is predetermined, there is no direct benefit to the organization, rather to government, or the resources to the state may not be used "judiciously" and there no need to worry too much about it ,among other reasons. What is clear is that irrespective of the reasons, organizations have not seen the need to have a clear-cut policy on taxation and its compliance. The recent GRA compliance exercises buttress this point.
With the usual corporate policies, sanctions are imposed for infringement on these policies such as taking leave without prior approval, reporting late to work, stealing, fighting, sexual harassment, and others. In the same way, non-compliance with taxes also come with imposition of sanctions that are defined in law in forms of fines, penalties, and interests, apart from possible imprisonment if criminality is established on the part of those charged with governance of the organizations.
Avoid Noncompliance
In order to avoid situations where staff could plead ignorance of the policies (though ignorance is not an excuse) they are made available to staff and they are made them sign to indicate haven read same for compliance. New members are given full orientation during on-bonding & subsequent changes. It is in the same light that tax compliance should be handled. Tax reviews, amendments to existing ones, new taxes, changes in rates and thresholds are made in the economic policy of the government in the same way reviews are sometimes done to make other corporate policies current and relevant. These are very important features of any serious institution operating in a dynamic environment.
The aims of corporate policies include a way of living the corporate values, cultures, compliance with state laws & policies, that emanate from the mission, vision or objectives of the entity concerned.
Need for Tax Policies
Taxes are legally bounded obligations but sadly, most businesses or organizations do not have specific tax compliance policies as part of their SOPs to ensure seamless compliance. We have policies on minor outflows such as petty cash for minor stationery items but taxes under withholding taxes (3%, 5%, and 7,5% up to 20% of taxable supplies ), value added tax and levies (21%), corporate tax (25% of taxable profit), employment tax (up to 35% tax band), capital gains tax, gift tax, International taxation with its jurisdictional issues, double taxation agreements, and other complications, etc that can run into millions, depending on the turnover and profits of the organization, are not given such attention until tax audit brings a liability for non-compliance mostly after a number of years have gone by. GRA tax audit normally brings this seemingly unexpected liabilities.
Could this be the result of tax compliance benefits not coming directly to us, or simply because it is a cost to our businesses, forgetting that it takes as much as 25% of the taxable profit, and significant of our turnover as collection agents for the state.
Some expense that are settled through petty cash for minor stationery items have policies & procedures guaranteeing their smooth administration, how much more tax in thousands and millions of cedis. Limits, documentary formats with approval, accounting for same are all unambiguously codified for compliance.
Benefits of Tax Compliance
Tax Compliance has these benefits to the organization in several ways such as allowing the taxpayer to pay their fair share of taxes (not more, not less than required of the taxpayer). It saves costs in the form of penalties, fines and interests, it improves corporate image - CSR, business continuity and sustainability is assured to an extent. It also allows the taxpayer to enjoy exemptions such as withholding taxes - haven proven yourself to the satisfaction of the commissioner.in terms of cashflow management it helps the taxpayer to pay in good time to avoid piling up leading to cashflow distortions. When the compliant taxpayer has cashflow challenges, the commissioner general may find it easier to grant extension for payment with prior written approval of the commissioner. Furthermore, it helps to avoid legal tussle with tax authorities - where 30% of tax liability due and in dispute should be paid before appeal to the courts could be heard (after settling all previous outstanding tax debts that are not in dispute).
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Compliance helps to attract investors into the business - stock market, bankers feel comfortable in dealing with the entity or the individual. In view of the above, share price and value preservation is assured with listed companies and there are no price shocks that come with huge impositions for non-compliance with tax laws.
Tax Revenue Mobilization Drive
Given the economic challenges and government target of "aggressive domestic revenue mobilization" as a statement in the 2023 Budget, it is expected that the GRA will intensify tax enforcement & compliance function. Voluntary Compliance is better for the corporate image & sustainable business. Therefore, taxpayers must craft Tax Compliance Policies to guide their operations and to show commitment to being a good corporate citizen.
[The author is a Chartered Tax Professional (CITG) and a fellow of ICAG]
