‘Garnishee’ notices
Section 272 of the Income Tax Act
empowers the Commissioner General to issue what amounts in effect to a
“garnishee notice” to collect unpaid tax indirectly from persons who
owe money to, or hold (or may be expected to hold in future) moneys on
behalf of the taxpayer.
This section has become a very useful weapon for the Commissioner
General to use to recover tax from difficult taxpayers, or those
facing financial hardships.
If you have not paid your tax on income you or your business received
and have made no attempts at all to pay the tax after you have been
issued a notice of assessment, you may have placed yourself in a
situation where you are not likely to receive any money owing to you
(including any money you or your business may have in an account with
a commercial bank), if the Commissioner General has already taken
steps to recover tax from those moneys.
The mechanism is relatively cheap administratively since the only
action the Internal Revenue Commission is required to take is the
preparation and service of a notice.
Once the notice is properly served, recipients of that notice do not
have any choice but to simply adhere to what is required of them by
the notice.
The notice can only be addressed to a specific category of person or
persons and these include: any person by whom money is due or accruing
or may become due to a taxpayer; any person who holds or may
subsequently hold money on account of a taxpayer; any person who holds
or may subsequently hold money on account of some other parts for
payment to a taxpayer.
This provision is pretty broad and covers virtually every situation
where a taxpayer may have his money and extends to include any
entitlement he may have to that money.
For instance, you or your company may have done some work or provided
services for another company or a government department and are about
to receive payment for work done, imagine what will happen if the
Commissioner General has knowledge of this payment if you have not
paid your tax.
Certainly you are not going to enjoy the fruits of your labour or for
services rendered as the Internal Revenue Commission would have issued
a “garnishee” notice on that other company or government department,
whatever the case may be. You may not even “see” the payment.
The notice may require the recipient to pay the sum specified either
immediately the money becomes due or is held by the recipient or
within a time specified by the notice. If the recipient holds any
money which exceeds the amount owing in tax, the notice will require
him to make payment up to the amount of tax owing.
If the Commissioner General receives any amount in respect of the
notice issued before payment is made by the recipient of the notice,
he is then obliged to notify the recipient or within a time specified
by the notice. If the recipient holds any money which exceeds the
amount owing in tax, the notice will require him to make payment up to
the amount of tax owing.
If the Commissioner General receives any amount in respect of the
notice issued before payment is make by the recipient of the notice,
he is then obliged to notify the recipient that he has already
received a payment in respect of the tax owing.
The recipient should then not act on the notice. For example, if you
have an unpaid tax for an amount of K10,000 but have an amount of
K10,000 deposited in an account with a commercial bank, and the
Commissioner General has issued a notice to that commercial bank, he
must notify the bank if you have make a payment of K10,000 for some
other sources so that you do not pay twice on the same unpaid tax.
You must comply with the notice if such a notice is issued to you. If
you fail to comply with the notice, your are liable to pay the amount
of tax specified in the notice or the amount due and held by your on
behalf of the taxpayer, whichever is the lesser amount. You may also
be liable to pay a fine for an amount from K500 to K5,000.
If the notice is issued to you and your are required to pay money to
the Internal Revenue Commission, you are protected from possible legal
action by the taxpayer. You will be deemed to have acted with the
authority of the taxpayer.
As a taxpayer, you should be aware of the existence of a “garnishee”
notice so that you are not caught off-guard and that there is a real
likelihood that you may be put out of business.
by MARK OPUR
