“The Income Tax Act created more criminals than any other single Act of government”– Barry Goldwater, US Senator
Tax evasion is a crime against the state and the GRA has declared its intention to prosecute tax defaulters in 2021. In the 2019 budget statement, the Minister of Finance, stated at Paragraph 291 and 292 of the 2019 Budget Statement as follows:
“Mr. Speaker, tax evasion is a crime. Deliberate undervaluation of import values, the ex-warehousing of imports from the bonded warehouses without prior payment of customs taxes, the suppression of sales, the non-issuance of VAT receipts for registered VAT businesses, the diversions of goods cleared as transit goods into the domestic market, and many other irregularities are all crimes perpetuated by criminals. In 2019, we will treat these offences for what they really are: crimes that must be prosecuted. In respect of tax debt recovery, we have already prepared files to enable us bring legal action against big tax payers. We will use various distress actions both sequentially and concurrently to retrieve tax liabilities from tax payers who have a habit of defaulting on their tax obligations. Mr. Speaker, in this there will be no sacred cows”
The GRA has been given many powers under the Revenue Administration Act, 2016 (Act 915) to prosecute persons for non-compliance. Negligent, unreasonable, deliberate, and fraudulent actions on the part of the taxpayers which results in under payment of taxes are criminalised in the tax laws.
WHAT ARE SOME OF THE OFFENCES THAT MAY BE PROSECUTED BY THE GRA?
The Revenue Administration Act, 2016 (Act 915) imposes two categories of penalties/offences
- Offences which attract pecuniary penalties: This type of offences are mainly administrative powers given to the Commissioner General to impose monetary fines as a result of failure to comply with the tax law. The pecuniary penalties are in addition to the original tax liability and they do not relief a person from criminal proceedings in court.
- Offences which attract imprisonments: The taxpayer can be prosecuted depending on the circumstances. This is in addition to the monetary fines.
The punishment is predominately based on the degree of culpability of the taxpayer towards his tax obligations, which ranges from deliberate attempt to reduce tax liability to careless preparation of tax returns and record keeping.
Section 78 to Section 85 of Act 915 provides some of the relevant sections on tax crimes.
FAILURE TO COMPLY WITH A TAX LAW (SECTION 78)
Taxpayers are obliged to comply with tax laws and Section 78 provides that a person who fails to comply with a provision of a tax law commits an offence. Where a specific penalty for the offence committed is not provided, then that person is liable on summary conviction to a fine of not less than one thousand penalty units (GHS 12,000) and not more than two thousand and five hundred penalty units (GHS 30,000) or to a term of imprisonment of not less than 2 years and not more 5 years or to both. A judge can sentence a tax defaulter to either fines or both fines and prison term.
Non- compliance means failure by a taxpayer to fulfil an obligation imposed by a tax law. They include failure to register for tax, failure to file tax returns, failure to keep proper records, failure to provide information etc.
From 1st April 2021, the Ghana card Unique Identification Number will replace the Taxpayer Identification Number (TIN) for individual taxpayers. This will enable GRA to access important data, even bank details under Section 146 (3) of the Bank and Specialized Deposit-Taking Institution Act, 2016 (Act 930) which allows a person’s bankers to provide information on the banking records to GRA.
FAILURE TO REGISTER WITH THE GRA (SECTION 79):
Tax registration is key in every tax administration. The law therefore imposes punishment if a person fails to register. Section 79 provides that, a person who fails to register commits an offence and is liable on summary conviction to
- Pay the tax payable under that tax law; and
- Pay a fine of not more than two times the amount of tax payable or an amount of one 1000 penalty unit [GHS 12,000], whichever is higher.
The Commissioner-General may also authorise the forfeiture of any goods or materials used by the person in carrying on the business of that person.
The case of Malan v State [2013] ZAWCHC 93 involves failure to register in which appeal against the conviction of the Managing Director of a company was dismissed. The company was required to register for VAT but failed to do so and did not charge VAT on the services rendered. The Managing Director was convicted for failure to register for VAT and sentenced to a fine of R15,000 and 4 months’ imprisonment.
FAILURE TO PAY TAX (SECTION 80): To establish the offence of failure to pay tax, the GRA must prove beyond reasonable doubt at least the following elements of the crime:
- that the person was under a duty by law to pay a tax;
- that there was a failure to pay a tax at the time required by law;
- and this failure was wilful.
Wilfulness in this context simply means a voluntary, intentional violation of a legal duty. Tax belongs to the state and Section 51 of Act 915 provides that, tax is a debt due to the Government on the date it becomes payable and the Commissioner-General may initiate proceedings in court for the recovery of unpaid tax as well as the cost of the suit. Lack of funds to pay tax is not a reasonable excuse. If a taxpayer does not have the money, the reasonable thing to do is to discuss with the GRA. Where the Revenue Authority grants the taxpayer an extension of time, the tax due would not have to be paid until the extended date.
In the case of Estate Agency Affairs Board v McLaggan [2005] 4, SA 531(SCA), an estate agent had deducted employees PAYE but instead of paying it to the revenue authorities, the money was used to pay operational expenses. He was convicted for dishonesty and sentenced to six month imprisonment.
Section 80 of Act 915 provides that, a person who fails to pay tax on due date commits an offence and is liable on summary conviction
- Where the failure relates to an amount exceeding two thousand currency points [GHS 2,000], to a fine of not less than two hundred penalty units [GH 2,400] and not more than one thousand penalty units [ GHS 12,000] or to a term of imprisonment of not less than 3 months and not more than 1 year or to both; and
- In any other case to a fine of not less than fifty penalty units [GH 600] and not more than two hundred penalty units [GH 2,400] or to a term of imprisonment of not less than 1 month and not more than 3 months or to both.
MAKING FALSE OR MISLEADING STATEMENTS (SECTION 81)
Tax assessment is heavily dependent on information provided to the tax authorities hence false or misleading statements made, especially with the intent of evading taxes are treated harshly by tax authorities when it is negligent, deliberate, and fraudulent statement. Section 81 provides that, a person who
- makes a statement that is false or misleading in a material particular to a tax officer; or
- omits from a statement made to a tax officer, any matter or thing without which the statement is misleading in a material particular,
commits an offence and is liable on summary conviction
- where, if the inaccuracy of the statement were undetected, it may have resulted in an underpayment of tax in an amount exceeding fifty currency points [GHS 50], to a fine of not less than twenty-five penalty units [GHS300] and not more than two hundred penalty units [GHS2,400], or to a term of imprisonment of not less than 3 months and not more than 2 years or to both;
- or in any other case, to a fine of not less than five penalty units [GHS 60] and not more than fifty penalty units [GHS 600] or to a term of imprisonment of not less than 1 month and not more than 3 months or to both.
In the case of United States v. Bok [1998] 156 F.3d 157 2d Cir, Bok was the president and sole shareholder of Abacus Construction. He failed to file his tax returns and that of the company. He eventually filed all returns but there were significant discrepancies between the company’s sales on the tax returns and the actual sales compiled from the company’s Bank Statement. Bok’s personal return did not include over $200,000 he had received from his company. He was indicted and tried on attempted personal tax evasion and making false statements on an income tax return. He was sentenced to 30 months in prison and 3 years of supervised release.
R v Werner & Clark [1998] CA STC 550 also deals with fake invoices submitted to reduce a company’s tax liability. It was held that, invoices submitted did not represent genuine transactions, but had been intended to reduce the company’s tax liability to enable its majority shareholders avoid tax payment.
CAUSING HARM TO A TAX OFFICER (SECTION 85):
In the performance of the lawful duties of tax officers, confrontation with taxpayers are likely to occur. In some cases, tax officers have the power to lock up premises of taxpayers and this may not be friendly especially when tax officers act unreasonably. Section 85 thus provides that, a person who shoots at, maims, wounds or causes harm to a tax officer acting in the execution of the duty of the tax officer commits an offence and is liable on conviction to a term of imprisonment of not more than twenty (20) years.
OFFENCES BY ENTITIES (SECTION 84)
Where the offence requires imprisonment, only officers in their natural capacity can serve prison terms and so it is the directors and managers who will be punished. Under section 84 of Act 915, where an entity commits an offence under a tax law, a person who is a manager of the entity at that time, is treated as also having committed the same offence unless the manager is able to prove that he exercised the degree of care, diligence, and skill that a reasonably prudent person in that position would have exercised in preventing the commission of the offence.
CONCLUSION:
The GRA has issued strong warning to tax defaulters. It is important for tax defaulters to put their house in order. With the use of the Ghana card as TIN, bank accounts, SIM card registration, SSNIT and with the help of Data analytics, GRA will be successful in finding out tax evaders. The Commissioner General of GRA on 23 January 2021 at the press briefing stated as follows: “This year GRA is going all out to pursue tax defaulters and persons who infringe on tax laws. We will launch a dedicated and special court for tax cases, as well as recruit more professionals to join the Prosecutions Unit”.
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The writer is a Tax Consultant and a member of the Chartered Institute of Taxation -Ghana
