Ghana Revenue Authority
In recent times, the Ghana Revenue Authority (GRA) has adopted stringent measures to collect tax liabilities owed by individuals and businesses and the new leadership must be commended for their efforts. On December 12, 2017 Metro TV was closed down for few hours until management went into settlement agreement with the Authority.
The Accra Mall, the busy shopping center in Accra was nearly shut down by the GRA for non-payment of taxes. Although these threats have yielded results, it is not the most prudent way to address the issue. This is because there is so much that can be done without having to close down a business.
Although, the worst hasn’t happened yet, business closures as a threat to collect tax liabilities cannot be encouraged in Ghana now.
Why business closures are bad.
1. Ghana’s biggest problem is unemployment and any government program, strategy or action must aim at reducing it and not vice versa. When people claim Ghana is sitting on a time bomb, most of them are referring to the unemployment situation and its repercussion in the future.
The recent Islamic uprising in the northern part of Africa and some parts of the middle east is fresh in our memories. Most of our social vices, vigilantism and even corruption emanate from so many years of very low employment rate in Ghana. Government’s number one problem to tackle, is unemployment. Therefore, any action that seeks to increase the numbers of the unemployed in the country cannot be good enough.
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3. Business closures will cost more than the tax liability could fix. The economy in general will suffer more if business closures are continued. When a business in closed, employees are laid off and are not paid. The multiplier effect of a person losing his/her job cannot be left to imagination. The loss of salary alone over time, will be more than the tax liability. When you consider the tax liability and the benefits it will provide the nation, and compare that to the cost of unemployment, it will be better to have the business open. In certain jurisdictions where jobs are available, and the employees of the closed business could easily find jobs, business closures will be a good policy. This is not the case in Ghana, therefore closure of businesses to facilitate collection of tax revenue cannot be encouraged.
4. Public perception of political vendetta can be damaging. When the GRA closed Metro TV for nonpayment of taxes, many people consider it as political vendetta, particularly for the move to come closely after the closure of various media houses by the National Media Commission for nonpayment of fees. It is perceived as a coy to silence opposition media. This can tarnish the image of the GRA and sabotage its good works. It can have a long term negative effect on its operations.
5. Closing a business even temporarily may ruin the survivability of the business. Several businesses who default on their tax payments, do so due to financial difficulties or liquidity problems. To close them even temporarily could jeopardize their chances of survival. Such businesses should rather be identified for support to continue to provide employment. To emphasize, I mean help for businesses who are on the brink of collapse, not the ones who aim at duping the system.
6. Nonpayment of taxes is partly due to corruption in the revenue collection system. Business owners have been allowed to get away with it. If the GRA is serious enough with its work, like in the case of Ibrahim Mahama, the level of default will reduce drastically.
What GRA should do instead:
There are several other methods that can be adopted to collect the taxes from defaulting taxpayers, without having to shut down their businesses. The following are recommended:
A. Place a lien on properties or assets of the businesses
B. No government contract for defaulting government contractors
C. Place embargo on liquid assets like cash and other near cash
investments of the defaulting businesses. At least a percentage of it.
D. May surcharge responsible officers personally for the taxes, e.g. management personnel or directors. Instead of closing businesses you may garnish wages of the responsible officers, or even place a lien on their personal assets.
If the GRA does not have the legal power to take any of the above actions, then that should be their first place of call. Business closure should almost be a no go area for the GRA for now.
