Introduction
This Article delves into the tax audit process. The tax audit process is a two-way street (involving the tax authority and the taxpayer). It being a process, there must be a series of activities carried out by the tax authority and the taxpayer to ensure that the conclusions reached at the end of the process are credible and supportable. The right of the taxpayer to be heard is very critical to the tax audit process as administrative bodies exercising decision-making powers must exercise such powers within the confines of the law and in accordance with the principles of fairness and justice.
Let us now consider the tax audit process.
The Tax Audit Process
The Tax audit process begins with a risk-profiling process. The GRA assesses your business and the level of compliance. The GRA will then serve you a nice introductory letter that they want to audit your business. The letter will usually state the name of your business, tax identification, the mandate given to the GRA to audit your business, the purpose of tax audits, the tax types to be audited, and persons going to conduct the audit.
Upon receipt of the letter, the taxpayer must make a decision as to whether to deal with the GRA directly or deal with the GRA with representation from a tax lawyer or tax consultant; which decision leads to the conclusion of a power of attorney.
Usual and typical of audits, we have something we call “professional skepticism.” The GRA visits your office, conducts an introductory meeting with key management in order to gain understanding of the business and transactions. This helps the GRA to form impressions about your business and confirm whether the risks determined after their risk assessment of your business are valid. They put on a bit of a doubt and this is what makes them probe further.
The GRA will request certain documents and begin their audit. Some of the documents they will request include: General business information and business registration certificates; Proof of tax registration; Contracts between company and customers/suppliers; Tax invoices and bills; Ledgers, Trial balance, and Audited Accounts; Bank Statements; Tax Returns; and Tax Payment Receipts.
After their preliminary audit, the GRA will present their findings and request the taxpayer to make certain inputs which may confirm the issues raised by the GRA or disprove them. If the taxpayer does not agree with the GRA on any point, it rests with the taxpayer to provide the necessary supporting documents, evidence, and canvass the relevant sections of the tax law to support the taxpayer’s position.
The GRA will then issue their final report after having reconciled their position with the taxpayer, have an exit meeting with the taxpayer, and indicate in their final report the period within which the taxpayer must settle the tax liability determined from the audit.
A taxpayer who is still dissatisfied with the GRA has various remedies in law and can employ various means to reach an amicable settlement with the GRA.
Conclusion
Going through the full chain of activities required for the audit of a taxpayer is very important in lending credence to work carried out by the tax authority.
More often than not, a lot lies within the control of the business or whoever is providing information to the tax authority. This is because such person is presumed to understand the business model very well. Giving out false or misleading information could therefore be detrimental to your business. At each point, make sure you confer with the GRA their understanding of your business and give them the necessary support they require. Always make sure you are on the same page and where there are disagreements, note them down and do further work in order to provide further and better particulars.
Make sure you agree timelines with the GRA and make sure you are given sufficient time to respond to the GRA’s queries. Once they provide their first draft report, review thoroughly and provide feedback. Resolve any discrepancies with them as well. Have (and do insist on having) the final exit meeting with the GRA and make any concerns known for incorporation into the final audit report.
About the Author:
This Article was written by Peter Kelly Agbeehia. Peter is a Chartered Tax Practitioner in Ghana and Transfer Pricing Consultant for an International Transfer Pricing and Tax Structuring firm with Offices in the UK, Ireland, South Africa, and Mauritius. His areas of specialty include Corporate and Commercial Law, Client Representation and Advocacy, Tax Advisory, Tax Compliance Management, Tax Audit Support and Controversy Management; Strategic Tax Planning; Transactions Structuring; Transfer Pricing and International Taxation.