Reflections on the Commissioner-General’s Power to Recover Taxes from Third-Party Debtors

Introduction:

In recent times, some banks and financial institutions have been freezing their customers account based on notices from the Ghana Revenue Authority (GRA) represented by the Commissioner-General. These customers wonder whether or not the Commissioner-General or anybody authorized by him has the power to garnish their account without prior notice to them or a Court order.

This article addresses this issue by explaining the position in law of the Commissioner-General and third-party Debtor. It also outlines (a) the conditions and steps to be taken to recover taxes from third Party Debtors; (b) content of the notice from the Commissioner-General; (c) the effect of complying with Notice; and (d) the inability of the Third Party Debtor to comply with the Commissioner-General’s Notice.

Who is the Commissioner-General?^[1]

The Commissioner-General is appointed by the President of Ghana in accordance with Article 195^[2] of the 1992 Constitution of Ghana and is responsible for the day-to-day administration of the affairs of the Ghana Revenue Authority (GRA). The Commissioner-General is answerable to the governing council of the GRA. He is also responsible for the direction and supervision of the employees of the GRA. He performs any other function determined by the governing council of the GRA.

He may delegate a function to an officer of the GRA but is not relieved from ultimate responsibility for the performance of the delegated function. In the absence of the Commissioner- General, one of the Commissioners of the GRA nominated by him shall act in his stead.

He holds office on the terms and conditions specified in the letter of appointment. He is appointed for a term of four years which may be renewed for another term of four years.

The Commissioner-General may be suspended or removed from office by the President for stated misbehavior orinability to observe conditions specified in the contract of employment. He may also be suspended or removed from office if he is declared bankrupt or insolvent; or convicted for a serious offence.

Tax as debt due to Government

Under Ghanaian law, unpaid tax is considered as a debt due to the Government. The Commissioner-General may initiate proceedings in court for the recovery of unpaid tax as well as the cost of the suit.^[3] There are other ways the Commissioner-General can use to recover tax from a taxpayer apart from commencing an action in court. One of those means is Recovery of Tax from a Third Party Debtor.

Who is a Third Party Debtor?

A Third Party Debtor” in relation to a taxpayer, means a person who owes money to the taxpayer.^[4] A taxpayer is a person liable to pay tax.^[5] A person who owes money to a taxpayer can be an individual, a company, a bank or financial institution. 

It must be noted that a bank or a financial institution is a debtor to its customer so long as there is a credit balance in the customer’s account. Thus, when a customer deposits money in his account the bank becomes a debtor of the customer and customer a creditor. 

 What is money owed to a taxpayer?

The following are treated as money owed to a taxpayer:^[6]

1. money currently owing, or that may subsequently become owing, to a taxpayer;
2. money held, or that may subsequently be held, for or on account of a taxpayer;
3. money held, or that may subsequently be held, on account of another person for payment to a taxpayer; or
4. money held by a person who has authority from a third person to pay the money to a taxpayer.

Note: “Money” includes a debt obligation denominated or payable in money.^[7]

Conditions for Recovery of taxes from a third Party Debtor

The conditions are:

1. Notice of assessment of tax liability must be served on the taxpayer.
2. The Taxpayer must fail to pay tax on the due date.
3. There must be a person who owes money to the taxpayer or hold money or may hold money on behalf of the tax debtor.

Steps for Recovering Tax from a Third Party Debtor

The following are the steps for recovering tax from a third party debtor.

1. The Commissioner-General shall serve a notice (hereinafter referred to as “the Commissioner-General’s notice”) in writing on the third-party debtor.^[8]
2. The date for payment must be specified in the notice.^[9]
3. The Commissioner-General is to serve the taxpayer with a copy of the notice as soon as practicable after service of the notice on the third-party debtor.^[10]
4. A third-party debtor who is served with the notice shall not pay any amount to the taxpayer until the Commissioner-General withdraws the notice.^[11]
5. The third–party debtor on receiving the notice must pay to the Commissioner-General the tax due by the taxpayer or the amount stated in the notice by the date specified in the notice.^[12]
6. It is noteworthy that an amount payable to the Commissioner-General by a third party debtor pursuant to the notice is a personal tax liability of the third party debtor.^[13]

Contents of the Commissioner-General’s Notice

The Commissioner-General’s notice must contain the following:

1. Details of the Taxpayer including addresses, names, Taxpayer Identification Number, among others.
2. The amount of tax due.
3. The date on which the amount is to be paid.

Effects of Complying with the Commissioner-General’s Notice 

1. A third-party debtor who pays money to the Commissioner-General as a result of the notice is treated as having acted with the authority of the taxpayer and of all other persons concerned. 
2. The third party debtor is also indemnified in respect of the payment against all proceedings, civil or criminal, and all processes, judicial or extra judicial, despite any provision to the contrary in an enactment, contract or agreement.^[14]
3. The notice ceases to have effect once the tax or obligation referred to in the notice is paid or otherwise satisfied.^[15]

Inability of the Third Party Debtor to comply with the Commissioner-General’s Notice

1. Where a third-party debtor served with the Commissioner-General’s notice is unable to comply with the notice by reason of lack of money owing to or held for the taxpayer, the third party debtor shall give notice of that fact to the Commissioner-General.^[16] 
2. The said notice (third-party notice) shall be in writing; setting out the reasons for the inability to comply. ^[17]
3. The notice must be filed with the Commissioner-General as soon as practicable after the third party-debtor becomes aware of the inability and, in any event, before the payment date specified in the notice.^[18]
4. The Commissioner-General may on receipt of the notice from the third party debtor, cancels or amends his notice or rejects the notice filed by the third party debtor and notify the third-party debtor in writing.
5. It must be noted that the filing of a third party notice has no effect on the third-party debtor’s personal liability for amounts unless the Commissioner-General cancels or amends his notice. 

Conclusion

The Commissioner-General representing the Ghana Revenue Authority has the power to garnish a taxpayer’s account without a prior notice to the taxpayer or a Court’s order. This is done when the taxpayer fails to pay tax on a due date, by serving a notice on the bank or a person that owes money to a taxpayer or holds money on account of a taxpayer. The said notice is thereafter served on the taxpayer. The notice automatically freezes the taxpayer’s account as soon as it is served on the bank.Thus upon receipt of the Notice, the third-party in question cannot pay any amount to its customer or the taxpayer until the Commissioner-General withdraws the notice or the tax liability is discharged.

---

Acknowledgment: The author is grateful to Mr. Salifu Wumbei of the Ghana Revenue Authority-Accra and others who commented on this paper. This paper would not have been completed without your contribution. All mistakes, errors, and blunders are my responsibility.

^[1]See sections 13, 14 and 15 of the Ghana Revenue Authority Act, 2009 (Act 791).

^[2]This article vests in the President the power to appoint persons to hold or to act in an office in the public services, acting in accordance with the advice of the governing council of the service concerned given in consultation with the Public Services Commission.

^[3]See section 51 of the Revenue Administration Act, 2016 (Act 915).

^[4]See section 60(8) of the Revenue Administration Act, 2016 (Act 915).

^[5]See section 9(3) of Act 915

^[6]See section 60(7) of Act 915

^[7]See section 60(8) of Act 915

^[8]See section 60(1) of Act 915

^[9]See section 60(4) of Act 915. The date for payment shall not be before the date the money owed by the third party debtor becomes payable to the taxpayer or is held on behalf of the taxpayer. Besides, the date for payment shall not be before the date the third party debtor is served with the notice.

^[10]See section 60(2) of Act 915

^[11]See section 60(5) of Act 915

^[12]See section 60(3) of Act 915

^[13]See section 60(6) of Act 915

^[14]See section 61(1) and (2) of Act 915

^[15]See section 61(3) of Act 915

^[16]See section 61(4) of Act 915

^[17]See section 61(5) of act 915

^[18]See section 61(5) of Act 915