West African governments are clamping down on non-compliance among business and individual taxpayers as they strive to improve their low Tax-to-GDP ratios or internally generated revenues.
As the tax year-end looms in Nigeria and Ghana, companies have an opportunity to evaluate whether their payrolls are fully compliant with the laws and regulations around collection of pay-as-you-earn (PAYE) tax.
Magnus Nmonwu, Sage West Africa Regional Director, says that the tax authorities in both countries are scrutinising more closely whether employers are complying with their tax obligations.
The Ghana Revenue Authority has embarked on an education drive to lift tax-to-GDP, which currently stands at 16.5%. It has accelerated its drive to bring small, medium and informal businesses into the tax net.
Nigeria, also seeking to improve its low Tax-to-GDP, has launched initiatives such as the Voluntary Assets and Income Declaration Scheme, which gives taxpayers an opportunity to voluntarily declare all previously undisclosed assets and income.
Some 90% of Nigeria’s 14 million taxpayers are salary earners paying PAYE. Government will be focusing heavily on rich individuals with undisclosed assets for enforcement.
Tax to fund development
“Without improving tax collection, West African countries will not be able to effectively finance the building of infrastructure and the provision of public services. We are seeing Nigerian and Ghanaian tax authorities take a more robust approach to registering tax payers and enforcing compliance to help the governments meet their tax collection targets,” says Nmonwu.
This means that businesses must ensure that they declare the correct earnings for all employees and that they include the right taxes and statutory deductions in payroll calculations. It has become increasingly important to ensure that annual returns are filed and submitted promptly and accurately to the relevant tax authorities to avoid penalties.
“Failing to comply – whether through deliberate evasion, late payment of payroll taxes underpayment as a result of a miscalculation – could cost your business dearly,” says Nmonwu.
“You could face large fines and penalty interest, or even imprisonment, for underpayment of taxes and statutory deductions.”
Out with spreadsheets
Because compliance is complex and the risks of non-compliance are high, West African businesses can no longer rely on spreadsheets and other manual methods to do their calculations and file returns. Automated solutions are becoming more essential for keeping reliable records and performing accurate payroll calculations.
Payroll solutions available for businesses from start-ups to mid-sized companies and larger enterprises – can help take care of calculating the complex formulas for the various deductions, generating compliance reports, and keeping accurate records. That makes it easier to perform accurate calculations, file submissions on time and generate reports and electronic payslips.
Tracking changing regulations
Automation makes it easier to keep track of changes to tax regulations that impact on payroll tax calculations and various changes in legislation. The software is constantly updated to align with the latest tax laws and tables, so one needn’t to update spreadsheet formulas or learn to make new manual calculations when changes are made.
“Business builders don’t go into business because they love filing tax returns,” says Nmonwu. “Using automated payroll software can help them save dozens of hours a year because they no longer need to worry about doing manual calculations or returns. Plus, they can rest easy knowing that automation reduces the possibility of human error. Payroll software takes the pain out of compliance, allowing business owners to focus on business strategy, customers, and employee engagement rather than on red-tape.”