In my years of experience as an auditor and a tax consultant, I noticed that most businesses, including some multinationals, get infuriated by the mention of the Ghana Revenue Authority (the Authority) simply because their experiences with some personnel from that office have not been pleasant. They always claim either the tax officers want to collapse their business or want to milk them.
I, therefore, want to share these five tax strategies below that will enable you to have a peaceful relationship with tax authorities that may contribute to business success.
Know your tax obligation
Often business owners are busy selling, with little concentration on which taxes impact their transactions. Taxpayers must be certain about their tax obligations, especially within their business industry. This recalls the canon of certainty, as one of the four cannons of a good tax system. Adam Smith explained certainty in plain terms to mean: “The tax each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, and the quantity to be paid all ought to be clear and plain”. Ghana’s tax system is not arbitrary, and therefore, business owners must have a working knowledge of their tax obligations to ensure that they do not pay huge sums of monies as interest and penalty, which could be invested into the business.
Plan your taxes
Most businesses do not budget for taxes in their annual budget plan, often due to ignorance of tax laws. If your business aims at increasing sales or acquiring additional assets for expansion, you must know the tax implication of your acquisition plan, will the acquisition result in withholding tax obligations? How, do you deal with the supplier who is not exempt from withholding taxes but refuses to let you withhold? In employing new staff, do we plan the taxes on the wages and salaries?
If you fail to plan your taxes, they accumulate and will result in penalties and interest which the authority will recover from the business in the future.
Every cedi amount of tax is worth saving
Personnel from the authority will not tell you the savings you can make under the law when they come to recover taxes from you. Business owners must be interested in tax savings they can make to reduce their tax liabilities. There are a lot of tax benefits, however, because most business owners are not aware of these, they turn to pay more taxes than they should pay. A number of businesses today are still not aware there is tax amnesty to save them from penalties and interest that have accumulated over the period. If you know your tax obligations and also plan them carefully, you are able to adjust income to expenditure to avoid the same taxes, and also make some savings. Taxpayers must be interested in the benefits provided in the Act for them.
Every business owner must have a compliance mindset, as non-compliance makes you pay more taxes than usual. I always use the example of driving a non-insured vehicle on the road as an example to my clients and potential clients who do not have the appetite for compliance. If you are caught by the police driving a non-insured vehicle, you may be forced to pay a bribe to the police of say GH¢5; assume you move your non-insured car every day and you are caught, you will keep paying the GH¢5. In a year, you would be paying one thousand, eight hundred and twenty Ghana cedis (GH¢1820) as a bribe to the police, this is five times more than third-party insurance in a year. This is the same for taxes.
Very often, business owners in Ghana do not see the essence of consulting simply because of the non-compliance attitude of some others due to the fact that they would have to pay for it. Even as consultants and practitioners, we do not know it all, we consult our colleagues and pay for it most of the time. This is the case because experience and knowledge are varied and no one person knows it all. If you are not too sure of the tax implication of your transaction, it is always better you consult. As consulting takes away doubts and provides certainty to your transactions, and hence, the business success, you will not have to use your investment to pay taxes.