In order to engage taxpayers and also to create the space for companies to determine their estimated chargeable income, which is in concert with their financial performance, the Income Tax Act 2015 (Act 896) introduced self-assessment.

Under this regime, taxpayers are required to estimate their chargeable income for the financial year and spread the payment of the tax on a quarterly basis.

Interestingly, due to cash flow constraints and other considerations, most taxpayers underestimate their chargeable income from the outset and do not often keep close eye on the submission of revised estimate of chargeable income to GRA which reflects their profitability outlook as the year wears on.

May I stress that there are penalties if your estimated chargeable income falls below certain threshold at the end of the year of assessment.

Section 70 of the Revenue Administration Act (RAA), 2016, states that where the estimate or revised estimate of tax payable by a taxpayer with respect to chargeable income tax for a year of assessment under section 122 of the Income Tax (ITA) Act 2015 (Act 896) is less than ninety percent of the correct amount, 70(2) of RAA provides that the tax payer is liable to pay interest on the tax due for the period, from the date the first installment for the year of assessment is payable until the date by which the person files a return of income for the year of assessment under section 124 of ITA.

You may agree with me that this is an avoidable tax expense as the ITA permits you to submit revise estimates with supporting documents before the due date of the installment payment.

It is recommended that after the third quarter ending 30 September each year, you work closely with your tax consultant on preparation of a revised estimate, which is in line with actual financial performance, if necessary, to forestall penalties.