Chief Executive Officer of the Private Enterprise Federation (PEF), Nana Osei Bonsu, has challenged government to vary tax rates with businesses across the country.
Speaking based on a survey conducted by his outfit and OSIWA-Project which revealed that 69.7% of Micro, Small, and Medium-scale Enterprises (MSMEs) operating in urban areas are oblivious of the laws guiding taxation of businesses, Mr. Osei Bonsu noted that the findings largely calls for reduction in taxes.
The findings from the survey also showed that, 70.8% of smaller businesses in the urban areas are registered with the Ghana Revenue Authority (GRA) and are therefore deemed to pay tax. However, only 49.4% in the rural areas have registered with the GRA.
With this, Mr. Osei Bonsu insisted that, these businesses and tax payers should also be educated extensively on taxes by the Ghana Revenue Authority (GRA).
“Our tax rate compared to our neighbors is very low. We’re generating 13.9% tax revenue of Gross Domestic Product to government. If we want to be able to make sure that government revenues go up to enable government do whatever we ask from government, then we have to vary the tax rate instead of charging the same 25% we charge on small potatoes sellers as same as we charge giant businesses”.
Additionally, he intimated that government must adopt a tiered tax system or a flat rate scheme for smaller businesses if it wants to generate adequate revenue.
The survey also revealed that 42.7% of business owners sampled in the urban centers were educated to the secondary or basic level whilst 39.9% had degrees.
Also, 92% of businesses in Ghana are MSMEs but they contribute only four percent of the total tax.
As part of an ongoing research supported by the Open Society Initiative for West Africa (OSIWA), PEF met with the leadership of the Parliamentary select committee on Trade and the committee on Finance to present to them findings and recommendations from its research work on reforming the tax system in Ghana. During the period, PEF also met key agencies such as the Ghana Revenue Authority (GRA) and Civil Society Organizations to discuss the findings and recommendations to solicit their inputs to shape the final report.
This will ensure that businesses in different financial categories are made to pay taxes commensurate to their financial capabilities (ability to pay). Effectively this system is expected to make tax compliance more voluntary on the part of the MSMEs resulting in an expanded tax net which will in turn lower the cost of tax administration and boost government tax revenues.
Eventually, it is the expectation that the private sector will become more tax compliant due to the introduction of better business-friendly provisions in the TIERED SYSTEM OF TAXATION taking into account the socio-economic realities of the business environment in Ghana thus creating a competitive thriving private sector which will boost government revenues to enable it execute its developmental agenda.
The next phase of the project will be to finalize and share the report with key stakeholders and policy makers in the country which will then launch us into full scale advocacy in print and electronic media. We believe this exercise will improve the ease of doing business in the country by creating an enabling environment for tax compliance and administration.
