There are times when a taxpayer needs certainty on what the tax authority will do in the future. The tax law allows for such taxpayer to approach the tax authority to obtain interpretation or assurances. Sometimes, the tax authority itself recognises the need to provide certainty on some matters.
Whenever the tax authority provides an interpretation of the tax law, it is only fair that the authority is not allowed to suddenly change its mind without due notice. The authority is also supposed to be bound by its interpretation. Are there adequate measures to prevent the tax authority from departing from its interpretation without notice to the taxpayer? What options are available to the taxpayer to ensure that after following a valid interpretation, it is still protected?
The Revenue Administration Act, 2016 (Act 915) provides two main ways for the tax authority to assure taxpayers on how it will interpret a text of the tax laws. These interpretations are supposed to guide taxpayers when they are engaged in certain transactions. By knowing the tax authority’s interpretation, the taxpayers can easily follow that interpretation and reduce disputes with the tax authority.
Practice Notes
The tax authority can unilaterally issue Practice Notes (“PN”). PNs are issued to cover matters that the tax authority has decided to clarify or set out how it will apply the law. PNs are entirely at the discretion of the tax authority, and it chooses which matters on which it wants to provide clarity.
Sections 100-103 of Act 915 contain the rules around PNs. These rules provide that anytime the tax authority is issuing a PN, it must be published in three different locations. The PNs must be published in the Gazette, the tax authority’s website, and in at least two daily national newspapers. These publication requirements are to ensure taxpayers are aware of the existence of the PN.
Not every officer within the tax authority can issue a PN. As the head of the tax authority, the primary person to issue the PN is the Commissioner-General (“CG”). Where the CG wants to delegate this authority, Section 2 of Act 915 requires the CG to delegate this power only to a Commissioner. Section 2(3)(d) of Act 915 provides that,
“…only a Commissioner may exercise the following powers on behalf of the Commissioner-General — the power to issue practice notes under section 100”.
The centralisation of the power to issue PNs may be due to the need for consistency. If all tax service centres or area offices across the country are left to issue PNs, there is bound to be inconsistency in the interpretation of the tax laws. Further, the restriction on the person who can exercise this power is due to the serious effects of a PN.
Anytime the tax authority issues a PN and sets out its interpretation, the law makes the PN binding on the tax authority. The tax authority is bound by whatever interpretation it provides in the PN and is not allowed to depart from it. The PN does not bind any taxpayer. One would expect that if a taxpayer agrees with the tax authority’s interpretation of the tax law as set out in the PN and follows that interpretation, there should be no dispute. The tax authority should not be able to change its mind and apply a different interpretation to the detriment of the taxpayer.
The rules say that the tax authority is free to amend or revoke a PN. However, the amendment or revocation will take effect prospectively. The old PN will continue to apply for arrangements commenced before the change.
Private Rulings
Private Rulings (“PR”) are materially like PNs. They are different in one main aspect. While the PN is unsolicited, a PR is only issued based on an application by a taxpayer. The rules governing PRs are in section s103-106 of Act 915. The PR essentially sets out the position of the tax authority regarding the application of a tax law relating to an arrangement that the taxpayer intends to enter or has already entered.
Another important difference is that for a PR, the rules set out its structure. In issuing the PR, the tax authority is required to
“set out the matters ruled on, identifying the tax laws, periods and arrangements to which the ruling applies as well as any assumptions that affect the ruling”.
The PR is binding on the tax authority if some conditions are met. These conditions include full disclosure by the taxpayer and the arrangement is carried out in the manner disclosed, the ruling is headed “private ruling”, and the period specified in the ruling is not exceeded.
Revocation and amendment of a PR follows a similar process as a PN. The tax authority can amend or revoke a PR through a notice to the taxpayer. A new law that is inconsistent with the PR automatically revokes the inconsistent part of the PR. The amendment or revocation applies to future arrangements and has a prospective effect. Unlike a PN, there is no explicit restriction on the officers other than the CG who can issue the PR. In our view, since both PR and PN do the same thing by stating the tax authority’s interpretation, it is ideal for both to be issued by the same category of officers. That will mean a PR should be issued by either the CG themselves or the Commissioner.
Where the taxpayer disagrees with the tax authority’s interpretation, the taxpayer cannot challenge the PR in court. However, if the PR is used to make a tax decision such as an assessment, the tax decision can be challenged through the dispute resolution mechanism in Act 915.
Customs Advance Ruling
Section 12 of the Customs Act, 2015 (Act 890) also provides for Customs Advance Ruling (“CAR”). This works as a PR but applies exclusively to customs. The rules provide that the CAR is binding on both the taxpayer and the tax authority until the tax authority overturns it.
Unlike a PR which cannot be challenged of itself, the law provides that a CAR can be challenged directly by the taxpayer. The taxpayer can either ask for the tax authority to review the ruling or proceed to court for judicial review.
Legitimate Expectation Doctrine
This doctrine is rooted in administrative law. It seeks to ensure fairness. In simple terms, if a public authority makes a promise to conduct its affairs in a certain way, it must be held to that promise. That promise is enforceable by the courts. It does not have to be an express promise. It can be implied. The promise can also be based on conduct. The goal is to ensure that anyone who relies on the promise, assurance or practice of the public authority should not be disadvantaged.
We can see that the PR, PN and CAR are able to trace their roots to this doctrine. The doctrine ensures that the public authority is bound by the promises it makes. In tax circles, an example of such a conduct is when the tax authority always gives a certain treatment in tax computations whenever it audits the taxpayer. The taxpayer is entitled to assume the tax authority will continue that treatment. If the taxpayer, based on this assumption, causes a change to their legal position or follows this treatment, it is entitled to prevent the tax authority from suddenly changing that treatment without due notice.
Some jurisdictions limit the applicability of this doctrine. One of the major limitations is when the promised or assured act is against the law. The reason is that the administrative body didn’t have the power to give the assurance in the first place. So, any assurance which goes beyond the power of the administrative body cannot be relied upon by the taxpayer.
Ghanaian courts are yet to fully consider this concept in tax matters. In Seadrill Ghana Operations Limited v Commissioner-General (H1/30/2023) dated 16 November 2023, the Court of Appeal rejected the arguments by the taxpayer on the CG creating a legitimate expectation by revising previous tax reports. The Court of Appeal argued that the provisions of Act 915 deal with resolution of tax disputes and “cannot be sidestepped for an expectation which is not backed by law.
This area is well-developed in other countries including Kenya. Some of the tax cases in Kenya have applied this doctrine even to the extent of rejecting assessments that demand additional taxes from taxpayers. Some rules developed in Kenya include the need for the expectation to be grounded in law and the promise should not offend any statute.
Tax audits
Sometimes, the tax authority doesn’t have to provide interpretations in the form of rulings or notes. Whenever an audit is conducted, the audit report contains interpretations especially on adjustments to be passed. Audit reports usually contain paragraphs indicating that the tax authority is providing tax education through the audit.
For instance, assuming the tax authority always treats an expense line as tax deductible in a company’s tax calculation, that treatment will be an interpretation. If the taxpayer relies on the treatment from the tax authority and in the future also deducts the expense for tax purposes, the tax authority cannot retroactively change its mind on the treatment. Based on the doctrine of legitimate expectation, the assurance, promise or guidance provided by the tax authority is binding until it notifies the taxpayer that going forward, it was going to depart from that treatment.
What does it mean for the tax authority to be bound?
In all three statutory instances where the tax authority is expressing an interpretation, the laws require the tax authority to be bound by that interpretation. In our view, the binding nature of these documents is to ensure that the tax authority does not give an assurance to the taxpayer and change its mind later to the detriment of the taxpayer. Where there is a need to change an interpretation, the change takes effect prospectively.
So, what happens if the tax authority decides that the interpretation it gave is wrong but decides not to follow the rules on revocation? Let’s assume that the tax authority issues a PR to a taxpayer stating that thin capitalisation rules should not apply to the taxpayer. This ruling was given in 2022. In 2024, the tax authority, through a tax audit, raised an assessment for the period 2022 to 2023 and disregarded the PR. That is, the assessment applied the thin capitalisation rules to the company, and this resulted in additional taxes payable by the company. The taxpayer had followed the PR and not applied the rules on thin capitalisation.
When the tax auditors’ attention was drawn to the PR, they said that the ruling was clearly contrary to the tax law and cannot be applied at any point in time. Doing otherwise would be illegal or contrary to the express provision of the tax law. The taxpayer also insists that the tax authority is attempting to revoke the PR and must follow the rules on revocation. Importantly, the new position can only apply prospectively. This dispute eventually ends up at the High Court.
At the High Court, the judge is faced with two main options. Let us assume that the correct position of the law is that thin capitalisation rules must apply to the taxpayer. If the court agrees with the tax authority that the proper interpretation and application of the law would mean that the thin capitalisation rules apply to the taxpayer, the court will have to ignore the clear provisions of the law on amendment and revocation of PRs. Further, the court will be ignoring the law on the binding nature of the PR on the CG. If, however, the court agrees with the taxpayer that regardless of the correctness of the PR, the tax authority is bound by it and the court must uphold it, the court would be endorsing a wrong interpretation.
So, the question is whether a court must uphold a PR even if in the court’s opinion, the PR is contrary to the proper interpretation of the law. The courts in Ghana are yet to be confronted with such a question. Despite this, Ghanaian courts have interacted with a PN. In Hon. Clement Apaak v Ghana Revenue Authority (CM/TAX/0448/2017), the plaintiff challenged the interpretation adopted by the tax authority in a PN. The court granted some of the reliefs sought and essentially struck down interpretations of the tax authority with which the court disagreed. So, in this case, the court performed its duty to interpret statutes by virtue of the Courts Act, 1993 (Act 459). It did not leave the final interpretive power to the tax authority. Some tax experts have questioned this decision using a purposive interpretation to say a PN should not be subject to challenge just as a PR.
Let’s assume that in the hypothetical scenario above, the court decides to enforce provisions of the law that make PRs binding on the tax authority. That will mean the court is endorsing an interpretation it considers improper. Assuming another taxpayer in a similar circumstance as the first taxpayer but without any PR appears before the same court, how will the court rule? Will the court apply the interpretation it finds to be proper to this taxpayer, i.e., enforcing the thin capitalisation rules? Does that mean two taxpayers with the same relevant facts will have different outcomes based on who has a PR on the matter? Is that the intention of the law?
Our view is that there is a reason why the law provides for the tax authority to be bound by its previous interpretation. Regardless of the form in which the matter ends up before the High Court, we submit that the court is not required to provide its own interpretation of the provision. Act 915 requires the court to enforce a valid interpretation provided by the tax authority by way of PR or PN. Even if the court finds fault with the CG’s interpretation, it is bound to uphold it. The PR or PN is not only binding if it is correct. Act 915 didn’t contain any qualification that only correct PRs or PNs are binding.
Further, but virtue of providing room for a PR or PN to be revoked by the CG directly, the law anticipates situations when the CG could change their interpretation of the law. So, even clearly wrong interpretations contained in a PR or PN that meet the requirements under Act 915 are binding. Despite the courts having final judicial power to interpret statutes, once Parliament made it explicit that an interpretation provided is binding until revoked, it means the courts must give legal effect to Parliament’s intentions of ensuring that the CG is bound by a previous interpretation. Common law principles also require the courts to hold the tax authority bound by its previous assurances or conduct to provide certainty to taxpayers.
How to enforce the binding position
Section 41 of Act 915 is explicit that neither a PR nor a PN is a tax decision. That means the usual dispute resolution process in Act 915 will not apply to a PR. That is, a taxpayer cannot disagree with a PR or PN and seek to take the disagreement to the ITAB. Act 915 is also clear that the contents of a PR cannot be challenged.
So, if the taxpayer cannot take a PR directly to court and must wait till the PR is used to raise an assessment before challenging the assessment, at what point can the taxpayer apply to the court to force the tax authority to use the PR? That is, assuming the CG changes their mind on the interpretation they provided in the past.
The best time to compel the tax authority to use the PR or PN is before the tax assessment is issued. Once the assessment is issued there may be issues with payment of a portion of the disputed tax first before being allowed to object. So, how does the taxpayer appear before a court when there is no assessment?
Section 41(1)(b) provides that a decision to revoke a PR or PN is not a tax decision. Had it been a tax decision, the taxpayer would have had to object and appeal the decision before approaching the High Court. Since it is not a tax decision, the objection and appellate process cannot be initiated by the taxpayer. That means that decision by the CG on the revocation, as an administrative body, is entirely open for judicial review by the High Court. The Supreme Court in the case of Afrifa Vrs Ghana Revenue Authority & Anor [2022] GHASC 100 (30 November 2022) has held that the judicial review jurisdiction of the High Court has not been ousted by the procedures in Act 915. So, a taxpayer affected by a decision to revoke a PR or PN may cause a writ of mandamus or certiorari to be issued against the CG.
A writ of certiorari will be appropriate if the CG issues a letter revoking the PR unlawfully. For instance, after issuing a binding PR, the CG later states that they are revoking the PR retroactively. The lawful process of the revocation of a PR is that the revocation operates only prospectively and never retroactively. If the CG decides to apply it retroactively, the taxpayer may seek to make the High Court quash the letter making the revocation retroactive.
The High Court can compel the CG to respect the revoked PR or PN for the periods before the date of the revocation. It is a statutory duty for the CG to apply the PR or PN to those periods and so where the CG is refusing to do so, they can be compelled. For completeness, we say that the principle in the case of Republic vrs. High Court Financial and Economic Division Accra, EX PARTE: Afia African Village Limited INTERESTED PARTY Commissioner-General, Ghana Revenue Authority (J5/08/2022) [2022] GHASC 135 (9 March 2022) will not apply here. In that case, the Supreme Court held that a decision not to refund monies to a taxpayer was a tax decision that should have followed the internal dispute mechanism in Act 915 instead of judicial review process. As we have already stated, Act 915 deliberately removes issues on revocation of PR or PN from the definition of a tax decision.
In the proceedings to resolve this dispute, the taxpayer must stress that the duty of the court is to answer the question of whether the tax authority refused to use a binding PN or PR as required by law or not. The case will not involve going into the merits of the case but rather to check if there is a binding PR or PN and whether the tax authority has refused to apply it.
Conclusion
Certainty is a cornerstone of any well-functioning tax system. Where taxpayers cannot predict how the tax authority will treat a given arrangement, compliance becomes guesswork and disputes become inevitable. The mechanisms under Act 915 (Practice Notes and Private Rulings) alongside the Customs Advance Ruling under Act 890, represent the legislature’s deliberate attempt to address this problem. They are not mere administrative courtesies; they are legally binding instruments with defined procedures for issuance, amendment and revocation.
The central lesson of this analysis is that the binding force of a PR or PN does not depend on its correctness. Act 915 imposes no such qualification. A ruling issued in accordance with the prescribed procedure binds the GRA, and where the GRA seeks to depart from it, that departure must follow the rules on revocation and operate prospectively. Any attempt to sidestep this process, whether by raising an assessment that ignores a subsisting ruling or by purporting to revoke a ruling retroactively, is open to challenge by judicial review before the High Court.
There are, however, significant questions that remain unresolved. Ghanaian courts have not yet directly confronted the question of whether they must uphold a PR or PN that they consider to be a misstatement of the law. The tension between the binding effect conferred by Act 915 and the constitutional interpretive function of the courts will, at some point, require a definitive answer. The doctrine of legitimate expectation, which provides the common law foundation for these statutory mechanisms, also remains underdeveloped in Ghanaian tax jurisprudence. How far courts are willing to extend it and under what limitations will shape the practical value of these instruments for years to come.
In the meantime, taxpayers are well advised to obtain formal rulings wherever possible, to ensure strict compliance with the conditions that make those rulings binding, and to act swiftly through judicial review when the GRA attempts to depart from a subsisting interpretation without lawful authority. The law provides the tools. The challenge now is for practitioners, taxpayers and the courts to use them with the rigour they deserve.
