Law of Taxation Article Index Law of Taxation
LECTURE I- GENERAL PRINCIPLES AND BACKGROUND TO TAXATION
LECTURE II- IMPOSITION OF TAX ON INCOME
LECTURE III- ASCERTAINMENT OF INCOME
LECTURE IV- ASCERTAINMENT OF ASSESSABLE AND CHARGEABLE INCOME
LECTURE V- TAX AVOIDANCE AND TAX EVASION
LECTURE VI- INCOME TAX ADMINISTRATION
LECTURE VII- OTHER TAX SYSTEMS IN GHANA
Introduction: Taxation as a concept Taxation as an economic concept and its role in an economy The legal basis of taxation Classification of Taxes: direct and indirect taxes, taxes on income and capital, consumption or expenditure taxes, progressive, regressive and proportional taxes. Equity Rules and a good tax system: views of classical economists and four cannons of taxation (Adam Smith); Equity in taxation: benefit principle, ability to pay, and horizontal and vertical equities.
Approaches to interpretation of tax statutes: Strict and liberal interpretation, Purposive interpretation and the modern approach. Income as a tax base: conceptual and practical distinctions between income chargeable to income tax and capital gains not chargeable thereto. History of income tax in Ghana. Sources of Income Tax Law- Constitution, Acts of Parliament, Rules and Regulations.
NOTE: This topic seeks to give the student a general background on the Law of Taxation. It draws the students attention to the origins of tax in economics and other social fields. It then tries to locate tax as a legal category and its basis as part of the body of Laws in Ghana. It is basically a contextual approach to the Law of Taxation to make the student familiar with the wider social location of the Course and why tax is relevant to the carrier of a Lawyer in Ghana. This lecture normally takes 8 hours, broken down to 2 weeks of 4 hours a week.
Income Tax Jurisdiction of Ghana (Act 592 of 2000): Source and Residence Rules- S. 2 and 3. Meaning of business (trade, profession and vocation), employment, or investment S.5 and 167. Meaning of income accruing in derived from, brought into, or received in Ghana, S. 6. Taxation of Employment Income: emoluments, benefits in cash and in kind, and Income from Investment S.8 and S. 9 respectively. Other taxable income, S. 2 and 3: Dividends, Interest or Discounts; Charge or Annuity; Royalties, Premiums and any other profits arising from property including rents; Periodical or Deferred Payment from Land and Natural Resources; and Management and Technical Service fees, not exempt from tax. Profits deemed derived from Ghana, S. 6(2).
NOTE: This topic addresses the fundamental issue that tax cannot be collected unless a law says so. In other words the student is made familiar with the fact that tax is not levied on the world at large and on all activities. The topic seeks to draw the students attention to how Ghanas tax legislation captures who and what activity are the subject of tax- jurisdictional basis of taxation. The topic seeks to address the following related questions: Do you tax income activities taking place only in Ghana? Do you tax income from sources outside Ghana and under what circumstances?, and What types of income activities are taxed? Because of the legal significance of this topic a period of about 10 hours is normally devoted to treating it. 4 hours are devoted to allowing the students to debate among themselves their viewpoints on tax jurisdiction in Ghana.
Expenses (allowable and non-allowable): Distinction between capital expenditure and revenue expenditure Meaning of expenses Wholly, exclusively and necessarily incurred Expenses specifically allowed S. 14-22 Expenses specifically not allowed S. 23 NOTE: Quite often students of tax law take it for granted that income is a concept everybody understands and in the same way. Yet this is a very problematic area in tax law. Therefore this topic is designed to equip the student with an understanding of the distinction between income, which is of a revenue nature, and other sources of income from capital sources.
Therefore the legal understanding of income is different from the economists notion of the concept. This topic also prepares the students mind on how you proceed from an identification of income, to what income is assessable to tax and how much of such income is chargeable with tax. This topic also prepares the student for an understanding of how one arrives at an assessable income and a chargeable income in the next topic- what expenses are allowed or not allowed under the tax statutes. This topic normally takes 4 weeks.
Meaning of Chargeable, Assessable, Gross or net income S. 5 & 6. Basis of Computing Assessable Income. Computation of Chargeable income of: Employees Self-employed persons and Traders Partners of a Partnership; and Companies Turnover Tax Capital Allowances S. 20 & and Third Schedule of Act 592 Chargeability of Trustee, Agents, Personal Representatives, etc. Tax Reliefs S. 39 Tax Exemptions S. 10-12
Rates of Tax: Individuals and Bodies of Persons S. 46-51 Tax on interest, Dividends, Royalties Double Taxation Relief Arrangements and Tax Credits S. 68. Capital Gains Tax S. 95-104 of Act 592 Gift Tax S. 105-110 Additional Profit Tax NOTE: This topic seeks to draw the important distinction between assessable income and chargeable income. The student is introduced here to how to interpret the statutory provisions on how a taxpayers tax is to be computed and how to compute the tax to be paid. The computation of the tax liabilities of three tax entities (individuals, partnerships and companies are introduced practically to the student.
To compute tax liability effectively the students attention is drawn further to tax reliefs (including double taxation reliefs), exemptions and the rate of tax applicable to the three tax entities mentioned above. Because of the peculiar nature of capital allowances as a deduction, it is treated under this topic to enable the student appreciate how it is computed. Capital Gains Tax and Gift Tax are also considered under this topic. In a nutshell this topic is devoted to computation of income tax of individuals and corporate bodies, Capital Gains Tax and Gift Tax. This topic takes 3 to 4 weeks of 4 hours per week in addition to 4 hours practical seminars.
Difference between tax avoidance and tax evasion Anti-Tax Avoidance provisions in Act 592 S. 69-71 & S. 112. Doctrines of Form and Substance (Case law) Artificial and Fictitious Transactions Scheme of Tax Avoidance; Bonus Shares, Transfer Pricing and Thin Capitalization. Anti- Tax evasion measures (see penalties and offences) S. 148-153 of Act 592, S. 118 (as amended by Act 644) Regulation 44 of L/I 1675, Regulation 7 of L/I 1727. NOTE: Under this topic the student is introduced to a historical development of tax evasion and avoidance schemes and how the Courts of Law have addressed them. This prepares the student for an understanding of the statutory interventions (anti-tax avoidance provisions) provided in Ghanas legislation. The student is further introduced to the international efforts of some jurisdictions to collaborate in fighting evasion and avoidance of tax in terms of todays global reality. This topic takes 4 hours.
Filing of Returns S. 71 Assessments: Self Assessment S.78 Provisional Assessment S. 76 & 79 Final and Conclusive Assessment S. 77 Service of Notice of Assessment S.120 Objections S. 128 Quarterly Payments S. 80 Appeals: To the High Court (Tax Appeals Court) S. 129 Rules of Procedure in the Tax Appeals Court To the Court of Appeal and the Supreme Court S. 130. Suits and Other Tax Recovery Measures S. 134-147 Penalties and Other Offences S. 148-153 Tax Clearance Certificates S. 118 Administrative Authority of Income Tax PNDCL 143 of 1986 and S. 113. NOTE: The first 6 topics basically deal with matters of substantive tax law. However, for a tax Lawyer, rules of procedure are an important part of his/her stock-in-trade. This topic therefore addresses the administrative, quasi-judicial, and judicial procedures in tax law, at the level of the powers of the Commissioner of Internal Revenue Service, Agents of the Service and those of the Courts. The appellate system in tax disputes is outlined to the student. It is expected that the student will bring his/her extensive knowledge in criminal and civil procedure to bear on this topic. This topic takes 6 hours.
An Overview of the Customs, Excise and Preventive Service (CEPS) (Management) Law, 1993 PNDCL 330 An Overview of the Value Added Tax (VAT) Act (Act 546) 1998 Petroleum Income Tax PNDCL 188 and PNDCL 87 Minerals and Mining Act, 2006 (Act 703) Ghana Investment Promotion Centre Act, 1994 (Act 478) Free Zone Act, 1995 (Act 504) NOTE: With the detail background of taxation of income, capital and Gifts in the earlier topics, the student is in a position to interpret and compute other taxes. This topic therefore provides a broad overview of other tax systems, drawing attention to the points of departure with the earlier tax systems considered in the previous topics. VAT has become an important revenue source in Ghana today and the student is introduced to the various points value is said to be added in a transaction to attract tax and how such tax is computed. This topic normally takes 4 hours.
Recommended Texts Dr. Benjamin Kunbuor: Ghana Tax Law Primer by. Printer: Agape Printing Press. Abdallah, Ali-Nakyea: Taxation in Ghana: Principles, Practice & Planning (Second Edition) by. Publisher: Black Mask Limited. Additional Reading Texts Davies Principles of Tax Law (3rd ed. 1996) S & M C. N. Beatle: Elements of the Law of Income and Capital Gains Taxation (9th ed. Stevens) Barry Pinson: Revenue Law (12th ed.) S & M Whitman and Wheatcroft on Income Tax and Surtax (S & M) A. R. Prest: Public Finance in Developing Countries (3rd ed. 1985 Weindenfield & Nicolson Lt. London) David R. Davies: Principles of International Double Taxation Relief (1985), London S & M Tolleys Tax cases (Tolley Publishing Co. Croydon, England) Statutes 1992 Constitution of the Republic of Ghana. Internal Revenue Act, 2000 (Act 592), with Amendments (Acts: 622, 644, 669, 684, 700 and 731). Internal Revenue Regulations, 2001 (L.I. 1675), with Amendments (L.I.1698, L.I. 1727, L.I. 1803, L.I. 1810, L.I. 1811, L.I. 1819, L.I. 1820, L.I. 1821, L.I. 1829, L.I. 1830 and L.I. 1831). Customs, Excise and Preventive Service (Management) Law, 1993 (P.N.D.C.L. 330) with Amendments. Value Added Tax Act, 1998 (Act 546) with Amendments. Value Added Tax Regulations, 1998 (L.I. 1646) with Amendments. Petroleum Income Tax Law, 1987 (P.N.D.C. L. 188). Minerals and Mining Act, 2006 (Act 703). Free Zone Act, 1995 (Act 504) Ghana Investment Promotion Centre Act, 1994 (Act 478)