Taxpayers are required to pay taxes on the profits from their businesses, investments, or employment. However, disputes may arise when taxpayers challenge the assessment made by tax authorities. But what happens when a taxpayer uses the wrong procedure to challenge their dispute? The case of Republic v High Court, Ex Parte Afia African Village Limited, Ghana Revenue Authority (Interested Party) provides valuable insight into the consequences of using incorrect procedures in challenging a tax dispute.
This case highlights the importance of adherence to proper procedures in tax dispute resolution, and serves as a valuable lesson for taxpayers.
Background: Challenge to a Tax Decision at the High Court
Afia African Village Limited, the applicant, had a parcel of land in Accra that was compulsorily acquired by the State in April 2016 for the Marine Drive Investment Project. As part of the compensation agreement, the State paid the applicant, but the Controller and Accountant General’s Department withheld a portion of the final payment, totaling GH₵2,116,679.78. This amount was paid to the Ghana Revenue Authority (GRA) as capital gains tax on the sale of the property.
The applicant challenged this decision at the High Court, seeking to compel the GRA to refund the deducted amount, contending that the deduction was unlawful.
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Opposition by the Ghana Revenue Authority
The Ghana Revenue Authority (GRA) opposed the application, presenting three key arguments:
1. Valid Withholding of Payment: The GRA argued that the payment to the applicant was validly withheld because it was subject to capital gains tax.
2. Lack of Obligatory Duty to Refund: The GRA claimed that the applicant failed to demonstrate that the GRA had a legal obligation to refund the disputed amount.
3. Improper Dispute Resolution Mechanism: More importantly, it argued that the applicant should have challenged the tax decision by objecting to the Commissioner-General of the GRA, as required by the Revenue Administration Act, 2016 (Act 915), instead of going directly to the High Court for relief.
Application Dismissed: Decision of the High Court
The High Court dismissed the application, citing two main reasons:
1. Lack of Obligatory Duty: The applicant failed to demonstrate that the GRA had a clear and unquestioned duty to refund the disputed amount.
2. Improper Procedure: The High Court held that the applicant’s approach in seeking relief was flawed. Specifically, the applicant should have filed an objection to the Commissioner-General of GRA before proceeding to court.
Application to the Supreme Court: Challenge to the High Court’s Decision
Unhappy with the High Court’s decision, the applicants appealed to the Supreme Court, asking it to overturn the ruling. They claimed the High Court was wrong in saying that the GRA was not required to refund the tax they believed was wrongly paid. They also argued that they had followed the correct procedure in challenging the tax decision, despite the High Court’s ruling.
High Court Vindicated: Supreme Court Affirmed High Court’s Decision
The Supreme Court unanimously agreed with the High Court’s decision and rejected the applicants’ case. It ruled that the applicants should have challenged the GRA’s tax decision by first filing an objection with the Commissioner-General, as required by the Revenue Administration Act, 2016 (Act 915). Instead, they wrongly went straight to the court for relief.
The Supreme Court stressed that when a law provides a right along with specific remedies and a set procedure for seeking redress, that procedure must be followed. Since the applicants did not follow the correct process, their case was dismissed. This ruling reinforced the need to follow proper procedures when resolving tax disputes.
Takeaways from the Case
1. Tax Decisions by GRA: Any decision by the Ghana Revenue Authority (GRA) to impose tax on monies gained by an entity or individual is considered a tax decision.
2. Objection Procedure: Objections to tax decisions must be lodged with the Commissioner General of the GRA within 30 days after being notified of the tax decision, in accordance with the Revenue Administration Act, 2016 (Act 915).
3. Limitation on the Courts’ Power: The High Court does not have jurisdiction to entertain disputes arising from tax decisions made by the GRA at first instance.
4. Tax Obligations: Pursuant to the Income Tax Act, 2015 (Act 896), individuals and entities are required to pay tax on monies received as compensation for the sale of their assets.
