On Wednesday April 5, 2006, a Ghanaian daily newspaper published a news item on its front page under the banner heading “Azar evades ¢11.7 billion tax”.
The paper disclosed that the Revenue Agencies Revenue Board (RAGB) contracted an audit firm, Paulphireb Enterprises, chaired by a Member of Parliament.
The audit firm revealed that Azar Chemicals Ltd. had evaded ¢ 11.7 billion tax.
I find the RAGB contract with the audit firm quite strange because there already exists in the Internal Revenue Service a National Tax Audit Bureau headed by Mr. Acquaye, a Chartered Accountant and President of the Institute of Chartered Accountants.
Apart from the National Tax Audit Bureau there exists in IRS a Tax Audit Division headed by a Chartered Accountant.
According to the IRS manual, “the objectives of the Tax Audit Division is to ensure that returns, normally final accounts of companies and enterprises filed by taxpayers, and on which assessments raised are accurate and reliable for tax purposes by conducting complete audit of the accounts submitted.
The audit should usually be carried out at the offices of the taxpayer. In a few cases, the books and records of companies are brought to the offices of the service for the audit.
The division and its staff have an added responsibility to detect and counter tax evasion and fraud and in doing so should aim at encouraging taxpayers to make accurate returns”.
There is also a Tax Audit Division at the Large Taxpayer Unit (LTU), a division that thrives on self assessment and collects over 50% of the revenue. Other tax audit units exist in CEPS and VAT.
In the face of these divisions (i.e. audit units, LTU, VAT and CEPS, National Tax Audit Bureau and the Tax Audit Division) I don't see the justification of contracting an audit firm to do a job that can be better handled internally without any leak to the press and at no extra cost.
Certainly, contracting the audit job to audit firms and bungling Parliamentarian Accountants when IRS, VAT and CEPS, have highly competent accountants on its payroll violates the words “fair and reasonable” in Article 23 of the 1992 Constitution, to wit “Administrative bodies and administrative officials shall act fairly and reasonably”.
In this connection, it should be pointed out that this is not the first time that Executive Secretary has contracted an auditing firm to perform for the IRS, CEPS and VAT.
About four years ago, the Executive Secretary contracted an audit firm to perform an audit. The firm was owned by a member of the Revenue Board. The revenue accruing from there was paid not into the consolidated fund but into an unlawful account number 01256-600581-13 opened at the Central Bank. Indeed the performance of the audit by the auditing firm owned by a board member constituted an outrageous conflict of interest.
Now, following the publication of the alleged tax evasion, the auditor of Azar Chemicals has rightly pointed out as follows:
a) A special tax audit if duly carried out by tax authorities constitutes an assessment under the tax regime.
b) In the case of the special tax audit, an auditee could accept the assessment…or could reject its tax assessment and raise an objection to the appropriate commissioner under section 128-129 of…Act 2000 and VAT Act 1998 as amended.
c) If the commissioner's findings were not acceptable, the auditee could still appeal to the High Court, the court of Appeal and thereafter to the Supreme Court if the auditee was still not satisfied.
d) Unit the conclusion of the matter in that regard, the auditee could not be said to have evaded tax.
Indeed, in my humble view if the Executive Secretary (RAGB) and Paulphireb Enterprise chaired by Mr. PC Appiah Ofori, MP, were worth their salt and very knowledgeable in taxation, they should, before going to the press on the inconclusive audit, have been religiously guided by the landmark tax case Republic v Maatschappij de Flinhoutlandel NV (Fynnout).
That case went up to Court of Appeal and was reported in the following Ghana Law Reports (a) (1971) I GLR, (b) (1974) GLR and (c) (1976) GLR I.
It should also interest the public to know that due to the important legal points raised in that case, Prof JEA Mills, then a lecturer at the Faculty of Law, Legon, wrote a paper on it in the University of Ghana Law Journal (Volume XV, 1978 – 81). The article was titled “The basis of liability to Ghana Income Tax, setting the records straight after the Republic v Commissioner of Income Tax, Ex Parte Maatshappij de Fijnouthandel N. (Fynnout)”.
Furthermore, although the Executive Secretary of RAGB has, since the creation of the board, exhibited a high level of impropriety and ineptitude on the job, he has been paying himself an outrageously high salary and allowances that is three times the pay of the Commissioners of IRS, VAT and CEPS.
Indeed, since the Executive Secretary does not perform three times the work of the Commissioner of IRS, VAT and CEPS, the excessive pay taken by him flagrantly violates the economic system articulated by Brian Tracy, a management consultant, in his book 'Goals' to wit, “in our economic system will be determined by three factors. First, what you do; second, how well you do it; and third, the difficulty of replacing you.”
Finally, I have, from the foregoing, pointed out the ineptitude in the handling of the Azar Chemicals audit and blunders festering in the RAGB. I therefore strongly cherish the hope that the sector minister will, in response to president Kufuor's anthem of Positive Change, put an end to the grotesque blunders taking place there.
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