Applicable Laws:
• Section 128 Act 592, as amended (Objections)
• Order 54, CI 47 High Court Civil Procedure Rules 2004 (CI 47) (Appeals)
Tax Appeals are an area of litigation that arises from disagreements regarding the extent of tax liability assessed by the Commissioner General and the tax liability proposed by the taxpayer.
1. WHAT EXACTLY IS A TAX ASSESSMENT?
A formal notice issued by or on behalf of the Commissioner General (hereinafter a ‘CG’) indicating an amount of tax owed by the taxpayer
2. WHAT IS A TAX APPEAL?
It is an appeal against a notice of assessment issued by the Commissioner General (CG) or on behalf of the Commissioner General for tax assessed as owed by the tax payer.
3. WHAT ARE THE TYPES OF CIRCUMSTANCES THAT MAY TRIGGER AN ASSESSMENT?
EXAMPLES INCLUDE, INTERALIA:
An audit or visit from a tax inspector or auditor who finds some of the following errors:
• Clerical error s – invoicing incorrectly, incorrect computation wrong
• Having a backlog of tax returns not submitted
• Wrongly deductible expenses – some errors that could be made are deducting private outgoings (which are not allowed under the tax law) as business expenses.
• Deducting travel to and from work as an expense which is not permitted under tax law etc
Errors may also be found on more technical points of law, for instance if you feel that your income is exempt and the Commissioner feels otherwise. This issue is particularly relevant with regard to ‘exempt organisations’. Income that is exempt from tax is specified under Section 10 of Act 592 amended – they include, for example, the President’s Salary, allowances, pension and gratuity of the President. This however does not include gifts and investment income, capital gains tax, gift tax and other source of income not specifically exempted under Section 10, as amended. Similarly, with exempt organisations, although their income (other than income from a business) is exempted under Section 10 of Act 592, as amended. Section 94, Act 592, as amended gives very specific requirements for an organisation to be and indeed keep its exempt status.
Where a taxpayer is unaware of these technical, legal requirements a tax assessment may be triggered. PLEASE NOTE: A Case Study, “GOLDEN TOUCH CHURCH” will be given at the end of this article to demonstrate how such a legal error may trigger a tax assessment and potentially lead to an appeal.
4. CAUSE OF ACTION/ OBJECTION
So, where an error is identified by the CG, for whatever reason, the assessment is raised by the GG. What is really important to note is that at this point the tax payer’s cause of action or right to appeal to the High Court against the assessment has not yet automatically accrued.
The taxpayer must FIRST LODGE AN OBJECTION to the assessment. This is prescribed by the tax law (Section 128, Act 592 as amended) and also supported by case law.
• ‘Fynhout Case’ [1974] 1 GLR 283, CA (Full Bench), particularly holding (ii)
• C Arghrou v CIT TR. 1/67, 6th December 1974 (unreported)
5. THE OBJECTION PROCEDURE
• The objection is to be made within 30 days of the service of the notice of assessment on taxpayer
• An objection to an assessment should be in writing to the CG
• The CG has discretion, on an application made by the objector in writing to extend the time for lodging the objection if he is satisfied the delay in lodging the objection was due to absence from Ghana, sickness or any reasonable cause.
• After determining the objection the CG may allow the objection in whole or in part and amend the assessment accordingly or disallow the objection in its entirety.
• As soon as is practicable after the CG has made his decision on the objection he shall serve the objector/taxpayer with a notice of his decision.
• But where the CG has not made any decision within 90 days after the objection was lodged, the objector/ taxpayer can elect by notice in writing to treat the objection as disallowed. The objector’s election will therefore be treated as a notice by the CG to disallow the objection with effect from the date the notice of election is lodged with the CG.
It is at this stage that the tax payer has the right to appeal to the High Court.
6. APPEAL TO THE HIGH COURT IS TREATED UNDER ORDER 54, CI 47.
TAX APPEALS ARE VERY TIME SENSITIVE
Any notice of appeal must be filed with the Registrar of the High Court, within 30 days of receipt of the dissatisfactory objection decision. An application for extension of time may be made where the tax payer satisfies the court that he was absent from Ghana, sick or any other reasonable cause.
HOWEVER, an application for extension of time must be made within three months after the expiry of the period fixed for filing appeals (30 days after receipt of the objection decision). This is made very clear under Order 54 rule 2 subrule 3. “No extension for application of time shall be entertained after the time specified….”
FORM OF THE NOTICE OF APPEAL AND THE CASES
The Notice of Appeal is much like any other appeal clearly indicating your grounds and any points of law you wish to rely on.
FILING OF THE NOTICE OF APPEAL
• 5 Copies of the Notice of Appeal, the Assessment and any documents to rely on.
• Entered into a register of tax appeals.
• Then served on the CG.
• CG to reply within 15 days of service of the notice of appeal, and any certified copies used in the assessment within 15 days of the CG’s reply.
The Registrar upon receiving the CG’s reply serves same on the appellants, fixes a date for hearing and hearing notices are issued within 21 days of the date set for hearing.
7. HEARING OF THE TAX APPEAL
The High Court judge may seek expert assistance and confirm, reduce or annul and assessment or make any order as deems appropriate. An appeal against the decision of the High Court may only be made on a point of law. A further right of appeal lies to the Court of Appeal and the Supreme Court within 30 days of the decision of the court below.
Ghanaian Cases that demonstrate how the Tax Appeal Procedure can be used to challenge or uphold tax assessments, whilst effectively utilising Ghana’s Tax laws are:
Chappell Hill School Case and the Multichoice Ghana Case
CASE STUDY ON AN ‘EXEMPT ORGANISATION’ THAT MAY TRIGGER AN ASSESSMENT: GOLDEN TOUCH CHURCH
‘Exempt organisation’ is defined under Section 94, as amended, so that an exempt organisation includes a person
(a) that functions as
I. religious or charitable institution of a public character
II. a state-owned or state sponsored educational institution
III. ……………VI
(b) that has been issued by the Commissioner-General with a written ruling in force stating that it is an exempt organisation
and
(c) none of whose income or assets confers or may confer, a private benefit other than in pursuit of the organisations functions referred to in paragraph (a)
GOLDEN TOUCH CHURCH CASE STUDY
1. The Golden Touch Church is established in 2005. It receives income from donations and tithes from its congregants which are used towards charitable causes in the community and for the assistance of church members and the upkeep of the church. At the time the church was established, the founder sought no tax advice as to whether or not its income from such was exempt as it is ‘popularly known’. All staff of the church receive a salary, whilst the pastors receive what is referred to as a monthly allowance for the spiritual work they undertake.
Assessment Issue – the church has not obtained a written ruling from the Commissioner General, therefore the income is not exempt per the requirements of Sec 94. In addition the salaries of the staff and the allowances of the pastors are income from employment and taxable per Section 8, Act 892.
2. The Golden Touch church becomes a national phenomenon, and by 2007, it has increased its congregation by tenfold. In addition, the church has established several businesses – there is a popular, privately owned restaurant on its vast premises, patronised by is its congregants. The church also has a bookshop selling stationery, books and CDs.
Assessment Issue – the business income of an exempt organisation is not exempt (Sec 10(1) (d), since the restaurant and bookshop is not an exempt organisation, operates for profit and is privately owned, the income derived from the restaurant and book shop is taxable.
3. By 2013, the Golden Touch Church has established its own university.
Assessment Issue: The 2013 amendment to Section 94, Act 592 now makes only state-owned or state sponsored educational institutions exempt. Privately owned educational institutions no longer qualify as exempt institutions. Thus, income from The Golden Touch University would not be exempt from 2013.
4. As a result of the popularity of the church, it appears that some of the income received from the congregants of Golden Touch Church has been used by individual pastors to acquire expensive cars and houses.
Assessment Issue – if it can be shown that income from the church has conferred a private benefit other than in pursuit of the organisations functions, that private benefit or income will not be treated as exempt- it would be taxable.
5. In addition, the pastors are regularly given lavish gifts by congregants, such as expensive jewellery and cloth, to show their gratitude and in the hope of attaining some of the blessings heaped on the pastors.
Assessment issue – gift tax would have to be paid on the gifts unless they were used for charitable purposes – which would presumably be difficult to prove in such instances.
[h3]OTHER PROECEDURES BEYOND TAX APPEALS ARE DEALT WITH UNDER ORDER 58[/h3] (where tax matters are treated as commercial matters), AND ORDER 55 OF CI 47, these procedures may be useful when the time frame for tax appeals has elapsed or where judicial review of the GGs implementation of the assessment is appropriate.
