Lifestyle Audits Demystified: Lawyer Clarifies Facts and Misconceptions—–One subject that has become rife in Ghana recently is the issue of lifestyle audit. The issue has become the talk of town after the display of opulence at the 40th birthday celebrations of the founder of Bills Credit.
The arrest of the former Director-General of the National Signals Bureau, Kwabena Adu-Boahene, has also fueled the conversation following the alleged numerous properties alleged to have been bought by the former DG, which are suspected to have been bought through questionable means.
A press conference by the Attorney-General and Minister for Justice, Dr. Dominic Ayine, announced that investigations are still ongoing to uncover the full facts of the matter.
With the recent happenings, many concerned Ghanaians are calling for intensified and periodic lifestyle audits to enable the state to nip corruption in the bud and also enable the state to mobilize the right amount of taxes from the affluent. But many questions arise on the subject. What does the law say about lifestyle audits? How can it be triggered? Are there penalties involved? Who can be audited and by whom?
Brand Focus Africa, through an interview with private legal practitioner Lawyer Randall Obeng-Sakyi of the Obeng-Sakyi & Company, is seeking to throw the spotlight on the subject.
Lifestyle Audits – The Legal Basis
It is interesting to know that the term “lifestyle audit” is not explicitly mentioned in the tax laws of the country. However, the tax laws generally mandate the Ghana Revenue Authority (GRA) to assess and investigate taxpayers to ensure compliance with tax obligations.
Lawyer Obeng-Sakyi explains that the Commissioner-General of the GRA has powers to audit individuals and entities on their tax matters. He says the Commissioner-General has the authority to request tax returns and supporting documents from individuals and businesses and access third-party information, such as bank records, property ownership data, etc.
When can Lifestyle Audit be Triggered?
Lawyer Obeng-Sakyi reveals that an audit can be triggered by the Commissioner-General if there is enough reason to believe that the information provided by a taxpayer is incomplete or inaccurate. Every taxpayer, the lawyer says, makes a declaration that the disclosures made on the returns are complete and accurate. However, if there is any reason to believe there is a discrepancy, the Commissioner-General can call for an audit.
This mostly comes into play when the income declared by the taxpayer does not reflect the kind of lifestyle they are living. This is when a person lives an opulent lifestyle with expenditures that do not reflect the income declared. In some instances, the person might not have declared any income. This power to institute an audit is granted by the Revenue Administration Act 2016.
“If you have filed a tax return, that says that your total income for 2024 was only GHC10,000 by illustration, and during that same period, you acquired a G-Wagon or even a Toyota RAV4, yes. So long as the commissioner general is of the opinion that the vehicle that you have acquired, or the asset that you have acquired, or your expenditure, is in excess of the income that you have declared for purposes of the tax, they can subject you to an audit,” the lawyer indicated.
He added: “From the totality of the powers of the Commissioner General and from the nature of our tax laws, the Commissioner-General can conduct a lifestyle audit on anybody.”
Are there Penalties Involved?
The law, according to Lawyer Obeng-Sakyi, grants the Commissioner-General to effect penalties after an audit. This happens after the audit reveals that the taxpayer has not fully declared his/her chargeable or taxable income or that taxes have been evaded.
According to the law, an unpaid tax amount can attract interest and additional penalties as prescribed by the tax laws. Under the Revenue Administration Act, individuals found guilty of tax evasion may face hefty fines or imprisonment. Moreover, the GRA has the authority to seize assets equivalent to the unpaid taxes.
“If you do not pay the correct tax or you fail to pay tax, there’s interest, there are penalties, and in some cases you may even be prosecuted and imprisoned,” the lawyer emphasized.
Moreover, the information obtained through the audit will also enable the GRA to adjust the individual or the entities’ tax obligations.
What are the Remedies Available to the Taxpayer?
Lawyer Obeng-Sakyi further reveals that individuals undergoing a lifestyle audit have the right to challenge tax assessments by providing documentary evidence to contest the Ghana Revenue Authority‘s (GRA) findings.
If the assessment is deemed incorrect, they can request a review or adjustment of their tax liability. Additionally, if dissatisfied with the GRA’s decision, they have the option to appeal to the Tax Appeals Board for further redress.
He said: “You can contest it as a citizen by providing the Commissioner-General with the relevant information or by challenging any assessment or adjustments that he has made.”
How Lifestyle Audits are Different from Corruption and Criminality Probes
The legal practitioner emphasizes that when the Commissioner-General seeks information, it is either to adjust your returns or make a tax assessment.
“Where you declared, say, GHC 10,000, but yet you acquired an asset worth $50,000. The Commissioner will say, well, in his opinion, your income was at least $50,000 because without that, you would not have been able to acquire the assets. So instead of taxing you on the GHC 10,000 that you have declared, he’ll tax you on the $50,000, which is the value of the assets you acquired,” he clarified.
Lifestyle audits do not necessarily mean the person of interest is engaged in any criminality. The person might be engaged in a legal activity but might have made some arrangement to enable him/her to avoid tax, which is not illegal.
However, if in the process of reconciling your income with your expenditure, it emerges that the source of an income is from an illegal activity, that is where he law enforcement agencies have grounds to investigate.
“When you file a tax return, you’re also supposed to provide details of the source of the income. Obviously, where the source of the income is tainted with criminality or corruption, then that aspect of it, that separate aspect of it would be a matter of the OSP. It would be a matter for law enforcement, be it the OSP, be it the Ghana Police, or be it Narcotics Control Board if the income is sourced from drug trafficking or drug related. The Ghana Police would definitely have an interest in it. You know, if the income is proceeds of prostitution or stealing and so on and so forth, the Ghana Police will have an interest in it,” he added.
To conclude, Lawyer Obeng-Sakyi maintained that lifestyle audits play a crucial role in ensuring tax compliance in Ghana. While the GRA has the mandate to assess individuals and businesses for potential tax evasion, taxpayers also have rights and remedies to contest any unfair assessments.
It is essential for individuals to maintain proper financial records, file accurate tax returns, and comply with tax obligations to avoid penalties associated with lifestyle audits.
