Taxpayers must follow dispute resolution process when objecting to a tax decision

Background

The Ghanaian government compulsorily purchased land owned by the taxpayer and compensation was paid to the taxpayer in tranches. However, after receipt of the final installment, the taxpayer discovered an amount had been withheld as tax. The taxpayer requested a refund in writing from the Ghana Revenue Authority (GRA), but the request was denied by the commissioner-general. Consequently, the taxpayer applied to the High Court for an order forcing the commissioner-general to refund the amount withheld.

The commissioner-general’s objection to the application focused on the following points:

• The payment was subject to capital gains tax, which was withheld from the amount paid;
• The taxpayer was unable to show that the commissioner-general was obliged under statute or otherwise to refund the amount in dispute; and
• The existence of a GRA General Refund Account under section 69 of Act 915 does not imply that the taxpayer provided evidence of entitlement to a refund.
  

In addition, the commissioner-general argued that the High Court lacked jurisdiction to hear the application, given that a tax decision had been made by the commissioner-general, and specific processes are provided under Act 915 for a taxpayer to object to a decision of the commissioner-general.The High Court dismissed the application, on the grounds that the taxpayer did not follow due process as set out in sections 42 and 44 of Act 915 and order 54 of  the High Court (Civil Procedure) Rules, 2004 (CI 47) for an objection against a tax decision.

The High Court also established that there needed to be an obligation for the commissioner-general to refund the amount of tax withheld, which the taxpayer was unable to prove.

The taxpayer proceeded to file an order with the Supreme Court to exercise its supervisory authority over the High Court and to quash the High Court’s decision.

Relevant legislation

Section 41 of Act 915 establishes that a tax decision is one made by the commissioner-general under tax law and defines the scope and process for reaching the decision.

Section 42 provides that a person who is dissatisfied with a tax decision directly affecting that person may lodge an objection with the commissioner-general within 30 days of being notified of the decision. The objection must be in writing and state the basis upon which the objection is made. A tax decision is final if no objection is made within 30 days of the receipt of the decision.

Section 43 provides that the commissioner-general may vary the tax decision, in whole or in part, or disallow the objection after receiving the taxpayer’s written notice. The commissioner-general is required to notify the taxpayer of the objection decision in writing within 60 days. If notification is not issued within that period, the taxpayer may either contact the commissioner-general to confirm the position, or elect to treat the commissioner-general as having decided to disallow the objection, in which case the taxpayer must notify the commissioner-general of this election in writing.

Section 44 sets out the procedure to be followed by a taxpayer who is dissatisfied with the commissioner-general’s decision under section 43. The legislation provides for an Independent Tax Appeal Board (ITAB), empowered by statute to determine taxpayer appeals against the commissioner-general; however, the ITAB has not yet been constituted and is not operational. Once operative, the taxpayer may appeal to the ITAB within 30 days of receipt of the commissioner-general’s decision, or within 30 days of the taxpayer’s election to treat the commissioner-general’s nonresponse as disallowing the objection. Where a taxpayer is still dissatisfied after a decision of the ITAB, the taxpayer may then make an appeal against the decision to the High Court, within 30 days from the date that the ITAB’s decision was served.

Judgement of the Supreme Court

The taxpayer argued that the commissioner-general has a statutory duty to refund amounts withheld as tax. The argument cited sections 69(1) and (2) of Act 915 and stated that the use of "shall" in subsection (2) makes it obligatory and mandatory for the commissioner-general to make payment of the tax refund. This, the taxpayer indicated, was because section 42 of the Interpretation Act, 2009 (Act 792) construes shall as mandatory.

Although the taxpayer’s argument centered on the wording of the applicable statute, the commissioner-general’s contention was that the denial of the refund constituted a tax decision, for which the taxpayer should have followed the procedure set out in sections 42 and 44 of Act 915, and CI 47.The Supreme Court agreed with the High Court judge's findings, stating that it was evident that the taxpayer had neither started, nor exhausted, these objection procedures before applying to the High Court.

The Supreme Court held that the High Court judge was correct in dismissing the taxpayer’s case on procedural grounds, and that the dispute had not yet entered the jurisdiction of the High Court.

Deloitte Ghana comments

In the current case, a tax decision was made when the commissioner-general refused to refund the amount withheld as tax. However, the taxpayer did not object to the tax decision within the time limit prescribed by the tax legislation, and filed a case with the High Court rather than following the process provided in Act 915 to compel the commissioner-general to issue a refund. Therefore, it appears that the taxpayer did not make use of the dispute resolution mechanism as required by law. It must be noted, however, that the ITAB was not operational as at the time of the case and this remains the position. It is difficult to anticipate the likely decision of the Supreme Court if the taxpayer had followed the correct processes to object to the tax decision.

Based on this ruling, taxpayers must follow due processes in objecting to tax decisions by the commissioner-general before applying to a court. Where a taxpayer is unsure about the best course of action based on the tax legislation, the assistance of a consultant is recommended.