The Act establishes a strict penalty and interest regime designed to deter non-compliance and compensate the state for the time-value of unpaid money.
Shortfall Penalties
A tax shortfall occurs when a taxpayer makes a false or misleading statement in a return, resulting in a lower tax liability than what is legally due. The TPA scales these penalties based on culpability:
- Deliberate or Reckless Statements: Attracts a heavy shortfall penalty (e.g., 75% of the tax under-declared).
- Lack of Reasonable Care: Attracts a moderate penalty (e.g., 20% of the tax shortfall).
If the taxpayer voluntarily discloses the error before an audit begins, the penalty can be significantly reduced or completely waived.
Late Filing and Late Payment Penalties
- Late Filing: Imposes a fixed statutory fine or a percentage of the tax due (whichever is higher) for failing to submit a return by the deadline.
- Late Payment: Triggers an immediate percentage-based penalty on the unpaid tax amount on the due date.
Statutory Interest
Interest is charged automatically on any unpaid tax balance from the date the tax was originally due until the date it is paid in full. This interest is compensatory, compounding monthly at a statutory rate (e.g., 1% per month), and cannot be waived by tax officers under standard circumstances, ensuring equity across the taxpayer base.
Â