Managing Partner at Ali Nakyea and Associates, Dr. Ali Nakyea has highlighted the need for continuous business operations amidst meeting tax obligations during times of crisis.
On the third day of the on-air series of the Citi Business Festival on Wednesday, Dr. Nakyea who spoke on the topic, ‘Compliance in Abnormal Times’ urged businesses to take advantage of the provision to keep them in operation.
The tax analyst shared some five insights that businesses that have been hard hit by the COVID-19 pandemic could do to remain tax compliant.
Tax compliance: There are unanticipated costs involved in not meeting your tax obligations. Two of them are penalties and interest. These are unwarranted costs which are not to be regarded as expenses for them to be deductibles from your income in the future. What you need to do is to look into the law and be sure to be meeting deadlines.
Tax extension: Businesses should apply to the Commissioner-General or the GRA for an extension of time or a variation for the time frame for meeting those commitments. COVID-19 is not over so we may want to appeal to the GRA and the government for that matter to look at an extension if things are not right. So if you are unable to meet the deadline, the best way of compliance is to apply to the GRA for an extension of time to file. I will go for an argument of deferment rather than a waiver. But deferment is trying to postpone the payment time so that you will be able to arrange your finances and be able to meet. They (GRA) do it a lot to help businesses even in normal times, how much more in abnormal times. So they are always ready to assist.
Donations & Receipt documentation: In these COVID-19 times, a lot of expenses that were not budgeted are coming on board. They are good to be well receipted because you can get certain deductions. In the Income Tax Act, any donation or contribution to the government for a worthwhile cause and approved by the commissioner-General is allowable deductions. In this period a lot of people are making donations but are they getting the documentation and an acknowledgment from the recipient so they can approach the commissioner-general with this evidence. This can reduce one’s profit to tax purposes.
Focusing on indirect tax: We seem to be concentrating on the direct tax. But what are saying about indirect tax which is also strict liability? I see the challenges of businesses to be the indirect tax other than the direct taxes because if you don’t earn the income or profit for those taxes, there is no tax. But whether you are making the profit or not, once you operating, you are incurring indirect tax. So to ease the cost of doing business, there should be more attention to indirect taxes. Once the indirect taxes are loaded all things being equal, expect costs to slow down and that should translate into increased profit and then the direct taxes will be there for them.
Self-audit: It is important to do self-audit because as taxpayers, we suffer what we call withholding tax. It is an upfront payment of your tax liability. So if you do your audit, you will find out that, the tax credits you have paid upfront exceed what your actual tax will be. The reason is that the withholding tax is on your gross amount and never took account of your expenses. So if your expenses are more than your income, this withholding will be a credit to you. Until you do that audit, you may not know that you have even overpaid your taxes. Especially in this COVID-19 time, when you do your audit, you realize that you have tax credits so why won’t you do a self-audit to manage your tax situation.”
The 2020 edition of the Citi Business Festival started on Monday, June 1, 2020, with a line-up of radio and TV programs. It will feature virtual business forums and will be live on Citi TV.
The month-long festival of business events and on-air activities provides inspiration, business ideas, and information for persons who are starting, building or growing their businesses.
This year’s edition of the Citi Business Festival is sponsored by Absa Bank, GIPC, Citi 97.3FM and powered by the most comprehensive business news website; citibusinessnews.com.