The role of the Judiciary in revenue mobilisation

The Chief Justice of Ghana in a letter dated 16th April, 2021 and addressed to the President of the Ghana Bar Association gave notice of the Judiciary’s intention to establish a Tax Court to deal with prosecutions of tax cases.

This follows calls from the Ghana Revenue Authority earlier in the year for the Judiciary to play a more effective role in the administration of tax laws.

This article assesses what the role of the judiciary in tax administration after the establishment of the court and how this role will increase government’s core agenda of revenue mobilization.

History of Ghanaian Courts and Taxation

The Judiciary under the 1992 Constitution of Ghana is the body empowered to administer justice. This includes determining civil cases and hearing prosecutions.

The judiciary plays this role through the justice administration system composed of lawyers, judges and prosecutors among others.

Traditionally, the judiciary has sparingly engaged in tax matters. This is demonstrated by the dearth of case law on taxation from independence to date. The effect of the lack of engagement has meant that Ghanaian taxation law has remained largely statute based. Tax practitioners have had to rely predominantly on English case law in construing the meaning of tax laws.

There are several reasons for the dearth in tax decisions from the Ghanaian Courts.

Firstly, taxpayers rarely challenge decisions of the Revenue Authorities or test the legitimacy of tax laws. Secondly, our tax laws have relied on administrative grievance remedial procedures to resolve tax disputes. Thirdly, there has been a lack of specialized courts that deal predominantly with tax matters.

These shortcomings amongst others have led the revenue authorities, tax practitioners and tax payers to call for the creation of a specialized tax court.

Creation of the Tax Court

In the notice to the Ghana Bar Association president, the Chief Justice appears to heed this call, by indicating that the Judicial Service is preparing to establish a tax court. What the notice does not do is to indicate the type of court that the tax court will be.

The options available to the Chief Justice include creating the court as a division of the High Court or District Court.

The pendulum appears to swing in favour of a division of the District Court. Similar specialized courts that exist in the status quo, like the Sanitation Court and the Motor Offences Court are all divisions of the District Court. Again, looking at the offences that exist in the current tax laws, they carry punishments that can be imposed by the District Courts.

The factors in favour of the court being a division of the High Court include the fact that the High Court is a court of record.

This means that the proceedings in the High Court are recorded. Secondly, the decisions of the High Court are capable of being judicial precedent and are reported in law reports for future courts to use.

The learned authors hold the view that it should be a division of the High Court similar to the Commercial division with its own bespoke procedure suitable for tax issues.

How the Court Will Work

According to the announcement, the purpose of the tax court is to deal with prosecution of tax cases. This means that the court will only have jurisdiction to hear prosecutions for breach of tax law.

The court will not have jurisdiction to hear or determine tax appeals from the decisions of the newly created Tax Appeals Board. It is the view of the authors that the Chief Justice should consider broadening the jurisdiction of the Tax Courts to include appeals. This will bring the court in harmony with the existing framework.

Under the proposed jurisdiction from the announcement, cases can only be brought by the Ghana Revenue Authority. Ordinarily, the Attorney-General is responsible for the prosecution of criminal offences, including breach of tax laws. However, the Ghana Revenue Authority has been given a fiat to prosecute breaches of tax law.

What this means is that prosecutions at the tax court will be investigated and prosecuted by prosecutors at the Ghana Revenue Authority.

The nature of offences that they are likely to prosecute for include failure to pay tax, making a false or misleading statement to a tax officer, omitting a statement to a tax officer and impeding the administration of a tax law, among others.

The offences carry varying punishments including fines and custodial sentences up to one year imprisonment.

Revenue Mobilization

The establishment of the tax court is a positive indicator that the Judiciary is willing and prepared to support the revenue mobilization agenda of the Ghana Revenue Authority.

The establishment of the court creates a unique opportunity for the Revenue Authority to capitalize on the judicial system to ensure compliance with tax obligations. How the GRA will go about prosecuting the cases will be instructive on the efficacy of the court in revenue mobilization.

If the revenue authority is able to effectively investigate, charge, adduce evidence and prosecute offenders, it will send a clear and strong message to tax defaulters and ensure compliance by deterrence.

However, if the Revenue Authority does not seize the moment, then it will represent another missed opportunity in the revenue mobilization agenda.

The establishment of the tax court also represents an opportunity to broaden the tax payer net beyond persons in the formal sectors of the economy.

If the Revenue Authority is able to extend prosecution to persons engaged in the non-formal and informal sectors of the economy, it would serve as a strong deterrent to persons in that sector that they can no longer continue to not pay tax.

Conclusion and Recommendations

The authors would like to congratulate the His Lordship, the Chief Justice on hearing the calls of tax practitioners and delivering the new tax court. It is a step in the right direction for effective tax administration and revenue mobilization in Ghana.

It is our humble recommendation to his Lordship that, the new court when established should be a division of the High Court.

Secondly, the tax court should not be limited in jurisdiction to just prosecutorial offences. The court should be given jurisdiction over tax appeals from the Tax Appeals Board.

These recommendations will ensure harmony between the tax court and the existing framework. The authors will also recommend that the GRA seizes the opportunity to send a clear message to tax defaulters by carrying out effective and cogent prosecutions.