Navigating tax audits: A practical compliance guide for SMEs

By Dickson ASSAN

For many small and medium-sized enterprises (SMEs) in Ghana, the mere mention of a tax audit by the Ghana Revenue Authority often triggers anxiety and, in some cases, outright panic. Yet, in reality, a tax audit is not a punitive exercise.

It is a fundamental regulatory tool designed to ensure that taxpayers are accurately reporting their income, applying the correct tax treatments, and complying with tax laws. At its core, a tax audit is simply an examination of a taxpayer’s financial records and returns to confirm accuracy and compliance. The real issue, therefore, is not the audit itself, but the level of preparedness of the business being audited.

The legal basis for tax audits in Ghana is well established. Under Section 36 of the Revenue Administration Act, 2016 (Act 915), the GRA is vested with the authority to examine and audit the tax affairs of any taxpayer. However, beyond this statutory mandate, recent policy pronouncements point to a clear and deliberate shift in enforcement strategy.

The Minister for Finance has indicated during the 2026 Budget reading that tax compliance enforcement will be significantly intensified from 2026 as part of efforts to enhance domestic revenue mobilisation. This position has been reinforced at the Kwahu Business Forum, where the President, His Excellency John Dramani Mahama,  reiterated the need to strengthen internal revenue generation. Taken together, these signals point to one undeniable conclusion: the era of relaxed enforcement is over, and businesses must reposition themselves accordingly.

This policy direction is not without justification. Recent data from the Ghana Revenue Authority reveals a troubling compliance gap within the tax system. Speaking at the Executive Business Dialogue 2026, Dr Martin Kobi Yamborigya, the Commissioner for the Domestic Tax Revenue Division (DTRD) of the Ghana Revenue Authority, disclosed that Ghana’s income tax gap stands at 67%, meaning that only about a third of potential income tax revenue is currently being collected.

Even more concerning is the state of VAT compliance, which stands at just 39%, leaving a 61% gap. These figures are not merely academic; they are a direct trigger for increased enforcement. At a time when government projections indicate that non-oil tax revenue will account for more than 80%  of total revenue, improving compliance is no longer optional; it is central to the country’s fiscal sustainability.

For SMEs, the implications of this shift are significant. Tax audits will become more frequent, more data-driven, and more comprehensive. Contrary to popular belief, audits are rarely random. In most cases, they are triggered by identifiable risk indicators such as late or non-filing of tax returns, persistent declaration of losses over several years, unusual income patterns when compared to industry benchmarks, frequent penalties and interest payments, or inconsistencies between declared figures and third-party data.

In today’s digital tax environment, where data matching and analytics are increasingly being deployed, even minor inconsistencies can raise red flags. In essence, a business does not necessarily need to be non-compliant to be audited; it only needs to appear unusual.

Another area that is often misunderstood by SMEs is the scope of tax audits. In general, the GRA may review a taxpayer’s affairs for a period of up to six years. However, where there is evidence of fraud, willful default, or material omission, this period can be extended. This underscores an important reality: poor compliance today can create long-term financial exposure that may only crystallise years later.

Once an audit is initiated, the process typically follows a structured path. It begins with a formal notification, followed by an introductory meeting where the auditors seek to understand the nature of the business, its operations, and the scope of the audit. This is then followed by detailed fieldwork, during which financial records, transactions, and supporting documents are examined. Queries are raised, responses are provided, and eventually, audit findings are issued. Where discrepancies are identified, additional tax assessments may arise, which the taxpayer may either accept or challenge through objection procedures.

The outcome of this process is largely determined by the quality of the taxpayer’s documentation. SMEs that maintain proper books of accounts, up-to-date financial statements, accurate tax filings, and well-organised supporting documents are far better positioned to navigate audits successfully. Conversely, where records are incomplete or poorly maintained, the GRA is likely to rely on estimates, and such estimates rarely favour the taxpayer.

In practice, most adverse audit outcomes are not the result of deliberate tax evasion but rather weak systems and poor compliance habits. Common issues include incorrect application of VAT, particularly under evolving frameworks such as the Value Added Tax Act, 2025 (Act 1151), failure to withhold and remit taxes appropriately, payroll inconsistencies involving PAYE and pension contributions, and the absence of structured bookkeeping systems. In many cases, businesses also submit documents to the GRA without conducting internal reviews to identify potential exposure areas, an oversight that can prove costly.

The duration of a tax audit is another area of uncertainty. There is no fixed timeline, as the length of an audit depends on several factors, including the complexity of the business, the quality of records, and the responsiveness of the taxpayer. What is clear, however, is that poor preparation invariably leads to prolonged audits and increased exposure.

Given this evolving landscape, the most effective strategy for SMEs is to adopt an audit-ready mindset. This involves maintaining proper accounting records on a continuous basis, reconciling accounts regularly, filing and paying taxes on time, and conducting periodic internal compliance reviews. Equally important is the separation of business and personal finances, as well as the early engagement of qualified professionals. While it is possible to handle a tax audit without professional support, doing so without the requisite expertise significantly increases the risk of unfavourable outcomes.

Ultimately, the conversation around tax audits in Ghana must shift from fear to strategy. A tax audit should not be seen as a disruption but as a test of the robustness of a business’s financial systems. The SMEs that will thrive in this new era are those that recognise compliance not as a burden, but as a strategic asset, one that enhances credibility, improves access to finance, and supports sustainable growth.

Dickson Assan, CA, is a Chartered Accountant, SME Business Consultant, and Career Coach. He advises businesses on tax compliance, financial management, and strategic growth.
Phone: 233 24 277 1314

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