CAN WE, AS A NATION AGREE TO DISAGREE ON THE FILING OF TAX RETURNS BY THE PRESIDENT OF THE REPUBLIC OF GHANA?
There has been ongoing debate as to the filing of Annual Tax Returns by the President, His Excellency John Dramani Mahama. Responses to the questions being asked have it that the returns relate to when he was a Vice President and also that the returns covered incomes other than his salary as a President, mention was made of revenues from a farm as well as the proceeds from his book.
I wish to contribute to the debate by looking at filing of tax returns by the President. This is because the issue of exemption from taxation as provided for in the 1992 Constitution of the Republic of Ghana as well as the Internal Revenue Act, 2000 (Act 592) does not cover the Vice President, hence there are no issues since the Vice President has to indeed file returns like any other Ghanaian taxpayer.
The issues raised in the debate include the following:
1. The President is exempt from tax so he is not required to file tax returns;
2. The President is not required to hold any office of profit or remuneration so his action is unconstitutional; and
3. If the President has decided to voluntarily file his tax returns then Ghanaians should be made aware of the contents of the return.
In this humble write-up, I seek to examine what the 1992 Constitution of the Republic of Ghana and Internal Revenue Act, 2000 (Act 592) as amended, provide as regard the ongoing debate in an attempt to agree to disagree on the issues raised above.
The Position of the Constitution of Ghana
Article 68 (5) of the Constitution provides that “The salary, allowances, facilities, pensions and gratuity referred to in clauses (3) and (4) shall be exempt from tax.”(Emphasis mine) The provision in this article is thus emphatic and clear that no tax is due on the salary, allowances, and facilities paid to the President as prescribed by Parliament. This is because the position in Article 68 (3) is that “The President shall receive such salary, allowances and facilities as may be prescribed by Parliament on the recommendations of the committee referred to in article 71 of this constitution”.
It is instructive to note that the exemption from tax as provided in the Constitution does not terminate at the end of the tenure of office of the President but is continued after leaving office. Article 68(4) is to the effect that the President, on leaving office, shall receive a gratuity in addition to pension, equivalent to his salary and other allowances and facilities prescribed by Parliament in accordance with clause (3) of article 68 of the Constitution.
The foregoing illustrates the constitutional basis why the President does not pay income tax on his salary, allowances, facilities, gratuity and pension. Is it so because of the Conditions of Office of President as stipulated under article 68(1) and (2)? This Constitutional provision states that
“68 (1) The President shall not, while he continues in office as President –
(a) hold any other office of profit or emolument whether private or public and whether directly or indirectly; or
(b) hold the office of chancellor or head of any university in Ghana.
(2) The President shall not, on leaving office as President, hold any office of profit or emoluments, except with the permission of Parliament, in any establishment, either directly or indirectly, other than that of the State.”
Were the framers of the Constitution seeking to “compensate” the President for his “sacrifice” of present and future potential other earnings from other offices from which he could have had profits or emoluments?
The Position of the Internal Revenue Act, 2000 (Act 592), as amended
In consonance with article 1(2) of the 1992 Constitution, the Internal Revenue Act, 2000 (Act 592), as amended exempts from tax under section 10(1)(a), the salary, allowances, pension and gratuity of the President (Emphasis mine). Indeed the Internal Revenue Act, 2000 (Act 592) could not have had any provision otherwise since that would have been inconsistent with the provision in article 68(5) of the Constitution and to the extent of the inconsistency been void. The provision in Article 1(2) of the Constitution is that “This Constitution shall be the supreme law of Ghana and any other law found to be inconsistent with any provision of this Constitution shall, to the extent of the inconsistency, be void”.
It is worthy of note that the Internal Revenue Act, 2000 (Act 592) is arranged in three chapters, Chapter I governs Income Tax; Chapter II governs Capital Gains Tax; and Chapter III governs Gift Tax. The provision in section 10(1)(a) grants exemption to the President from income tax from his gains and profit from employment only, since it mentions the salary, allowances, pension and gratuity. This exemption does not cover capital gains made by the President nor does it cover gifts received by the President. Indeed incomes accruing in, derived from, brought into, or received in Ghana by the President other than salary, allowances, pension and gratuity are thus not exempt from tax.
Section 95(1) of Internal Revenue Act, 2000 (Act 592), as amended is to the effect that capital gains tax is payable by a person at the rate of fifteen per cent of capital gains accruing to o derived by that person from the realisation of a chargeable asset owned by that person. Exemption from capital gains tax is provided for under section 101 of Act 592, as amended and there is no provision for exemption from capital gains tax for the President. Is the President thus not liable to tax on any capital gains accruing to or derived by him on the realisation of a chargeable asset? Of course he is liable to tax on any such capital gains realised.
Section 105(1) of Internal Revenue Act, 2000 (Act 592), as amended is also to the effect that a gift tax at the rate of fifteen percent (15%) is payable by a person on the total value of taxable gifts received by that person by way of gift within a year of assessment. The exemptions from gift tax are provided for under section 105(2), as amended and no provision is found granting the President an exemption from the payment of tax on gifts received. Is the President thus not liable to pay tax on taxable gifts received? Of course tax is due in such an instance.
Following from the analysis above, the issues raised can be addressed as below:
1. The President is exempt from tax so he is not required to file tax returns.
The filing of tax returns is governed by section 72 of the Internal Revenue Act, 2000 (Act 592), as amended which is to the effect that a person shall furnish a return of income for a year of assessment of that person. The time frame for filing of returns is given as four months except in the case of employees whose sole source of income is from employment, in which case under section 81(4) of Act 592, as amended the employer is required to furnish their returns not later than 31st of March following the end of every year of assessment.
Thus if the President’s sole source of income is from employment then his employers are required to have filed his returns. However, if he has other sources of income other than from employment then he has to file his returns personally within four months after the end of the year. Thus filing his tax returns on April 2nd puts him in good stead of having met the time line for filing returns thus avoiding the payment of penalties for late filing of returns.
There would have been a penalty had it been the case under section 81(4) in which case the deadline for filing returns was 31st March. Any such penalties could also have been avoided anyway if the President had applied for extension of time to file returns under section 74 of Act 592. More so, the Internal Revenue (Tax Amnesty) Act, 2012 could have been relied upon to seek a waiver of any such penalty.
Section 73 of Act 592, as amended provides for cases where return of income is not required. It should be noted clearly that no provision exists that states that where a person is exempt from tax that person needs not file a return. However, a combined reading of section of section 6 of Act 592 on Assessable income, which is defined to exclude exempt income, and section 5 of Act 592 on Chargeable income, seems to suggest that under section 73(b)(ii), the President is not required to file a return if he has no chargeable income. This is because chargeable income is defined to be the assessable income less the total amount of deductions available to a taxpayer, thus if exempt income is not included in assessable income, then there is no chargeable income, hence no returns are required to be filed.
Indeed, to my mind, a return of income is required as that assists the Ghana Revenue Authority to determine tax expenditures, which is tax revenue forgone by way of exemption from tax granted certain categories of taxpayers, real or potential, including the President. It is instructive to note that under section 73 of Act 592, the Commissioner-General can request by notice in writing to the President to file his return of income. This is because filing of returns does not necessarily result in payment of taxes, thus the two should be distinguished.
Section 72(2), (3) and (4) of Act 592, as amended, state and describe the nature of a return of income. It is in a form prescribed by the Commissioner-General, shall state the information required, and shall be furnished in the manner prescribed by the Commissioner-General. It shall include a declaration that the return is complete and accurate and shall be signed by the person making the return.
Following from the above, the President is indeed required to file a return of his income, both exempt and taxable.
2. The President is not required to hold any office of profit or remuneration so his action is unconstitutional.
I am inclined to surmise that the argument here is that if the President is filing returns of income then a profit or remuneration accrued to him from an office, meaning he has or is holding an office of profit or remuneration in contravention of article 68(1) of the Constitution.
Unfortunately “office” is not defined in the Constitution. The closest definition is “public office” under article 295 which “includes an office the emoluments attached to which are paid directly from the Consolidated Fund or directly out of moneys provided by Parliament and an office in a public corporation established entirely out of public funds or moneys provided by Parliament”.
Granted this is the meaning attached to an office, if the President’s return of income showed, for example income from a farm he owns and inflows to him from the sale of his book “My First Coup D’Etat – Memories from the Lost Decades of Africa”, can such incomes be construed to be profits from an office or emoluments?
The Internal Revenue Act, 2000 (Act 592) does not also provide us with a definition of an office but states in section 94 that “employment” means “(a) the position of an individual in the employment of another person; (b) the holding of or acting in any office or a position entitling the holder to a fixed or ascertainable remuneration other than an office or position as director of a company or manager of a body of persons”.
Thus an “office”, from the definition above connotes a position entitling the holder to a fixed or ascertainable remuneration. Is or did the President indeed hold any such position, thus making him entitled to a fixed or ascertainable remuneration to constitute a breach of article 68(1)? Are earnings from the book and a farm, for example, constitute remuneration or profit from an office?
In the absence of a clear definition of an “office” in the Constitution and the Internal Revenue Act, 2000 (Act 592), readers should kindly permit me to quote Rowlatt J. In Great Western Railway Co. v. Bater  3 KB 266 in which he defined “office” to mean a “subsisting, permanent, substantive position which has an existence independent of the person who filled it, which went on and was filled in succession by successive holders”.
The definition of Rowlatt J. was considered by the House of Lords in Edwards v. Clinch  3 All ER 543 in which Rowlatt J.’s dictum was generally approved by their Lordships. Lord Wilberforce stated, inter alia about the word “office” that “… the word must involve a degree of continuance (not necessarily continuity) and of independent existence; it must connote a post to which a person can be appointed, which he can vacate and to which a successor can be appointed.”
It follows from the above that the returns of income of the President form say farms and the sale of his book cannot constitute the holding of office of profit or emoluments. Thus there is no breach of the provisions of article 68(1) of the Constitution.
3. If the President has decided to voluntarily file his tax returns then Ghanaians should be made aware of the contents of the return.
Unfortunately there is no statutory obligation of making the contents of a tax return public. I guess this is why a section of the public are of the view that there was no need for the symbolic filing of returns by the President being made public since what the contents are would not be made known to them.
Once the person filing his/her returns of income does not disclose its contents to the public then of course the Officers of the Ghana Revenue Authority are barred under section 127(1) of Act 592, which bothers on Official Secrecy, not to disclose the contents of a person’s return of income, unless under an order of a superior court or as provided for under Act 592, specifically section 127(2).
The provision states “A person appointed under, or employed in carrying out the provisions of this Act shall regard and deal with all documents and information which may come to that person’s possession or knowledge in connection with the performance of functions under this Act as secret and shall not disclose any information or document except in accordance with the provisions of this Act or under an order of a superior court”. (Emphasis mine)
The other circumstances under which the contents of a return of income can be disclosed are provided for under section 127(2) as follows:
“Nothing in this section shall prevent the disclosure of information or documents to
(a) the Minister responsible for Finance or any other person when the disclosure is necessary for the purposes of this Act or any other fiscal law;
(b) a person in the service of the Government in a revenue or statistical department where the disclosure is necessary for the performance of official duties;
(c) the Auditor-General or a person authorised by the Auditor-General where the disclosure is necessary for the performance of official duties; or
(d) the competent authority of the government of another country with which Ghana has entered into an agreement for the avoidance of double taxation or for the exchange of information, to the extent permitted under that agreement.”
It is evident that any call for the disclosure of the contents of the President’s return of income cannot be heeded since it is not supported by the Constitution or the Tax Legislation.
Following from the discussions above, is it wholly true that the President is not required to file a return of income or pay tax? Are we not rather oblivious of the fact that the President is exempt from tax only on his salary, allowances, gratuity, pension and facilities; and that he is liable to tax on other incomes including capital gains and taxable gifts?
Considering the calls that have been made on the Constitutional Review Commission to address the issue to make the President liable to pay tax to set an example as a leader, can we not, see the symbolic gesture of the President filing a return of his income as a rehearsal of what lies ahead of him if the submissions are accepted?
Since a section of the Ghanaian public indeed made such submissions to the Constitutional Review Commission, how do we reconcile that with a section of the Ghanaian public which now sees the gesture as uncalled for? Is the position of the section that sees it is uncalled for a vote that we maintain the tax exemption status of the President?
Under paragraph 187, the Minister for Finance, Honourable Seth Tekper stated that “Mr. Speaker, the Ghana Revenue Authority (GRA) is to set up a dedicated office to assist tax payers in filing their tax returns. Additionally, the GRA will simplify the preset tax returns form which will make it a lot more convenient for tax payers who have no other income apart from their salaries to file returns.”
Is the symbolic gesture of the President filing his return of income in line with leadership by example by testing this proposal of his Minister for Finance? Are all the Ministers, Municipal and District Chief Executives, indeed all Government Appointees and Functionaries with sources of income, other than income from employment following suit? Are the discussants, debaters, etc of this topic of the President’s symbolic tax filing gesture preparing to file their return of income? We should all remember the deadline is April 30, 2013. Adherence to filing of return of income will enhance tax compliance in Ghana, leading to improved revenue mobilisation for development and as taxpayers we can collectively hold government accountable for the use to which our tax revenue has to put.
Can we agree to disagree?
(FCIT, FICB, FCCE, FCFA, MIIA, CFIP, CEPA, CA (GH), MTP(SA), MPhil (Econs), LLB (Hons), BL, B.A. (Hons) Econs)