The Chief Executive Officer of the Private Enterprise Federation (PEF), Nana Osei Bonsu says the reason for the evasion of tax by some Micro, Small and Medium Enterprises (MSMEs) is because the 25% one-size-fits-all tax rate on net income for business enterprises is unfavorable.
He mentioned that the 25% of net income as tax adversely affects the finances of MSMEs given the income ranges of these companies.
“An MSME which earns maybe fifty thousand at the end of the day, they have to pay 25% of their net income in tax. They set up the business to make money; they did not set up the business to pay taxes but they do so as part of the business laws. So, if you make it very difficult for them to pay, they run, they do not pay.”
Mr. Bonsu expressed worries on the ambiguity of the tax laws which makes it difficult for owners of these MSMEs duly understand and comply as such. He said that in order for some owners of these MSMEs to well understand these laws, it comes at the extra cost of employing the services of an accountant or an auditor, such extra cost most MSMEs are not willing to bear.
“The tax laws are way too high that they cannot understand it and so they have to hire an accountant or an auditor to be able to pay the taxes. Nobody in their right mind is going to hire an auditor, pay the auditor and again pay taxes.”
He further went on to say if there is a reduction in the tax rate according to the earnings of these enterprises, the country will record a surge in the number of MSMEs voluntarily paying taxes.
“We have done this research and compared with our peers, Nigeria, Sera Leon and others who have staggered tax system and if this is applied here in Ghana it will broaden the tax base, a lot more people will do voluntary compliance”.
Mr. Bonsu made these comments on the back of a research conducted by his outfit which revealed that, MSMEs which constitute 92% of businesses contribute only 4% to the tax revenue of the state.
He stated categorically that, according to the research conducted by his institution, it is a false assertion that majority of businesses do not want to pay tax but they are rather pushed to evade taxes in the bid to keep their businesses afloat.
“People think majority of the businesses do not want to pay tax, that is not true. We researched across the nation, the concerns are the same, we want to pay our taxes if it is made easy for us, we want to pay our taxes by doing it ourselves not to pay a third party before we pay our taxes”.
He also made mention of the like-mindedness of the two main political parties (NPP and NDC) to judiciously reduce the tax burden on businesses but however said the proposed system of reducing taxes by the Private Enterprise Federation is the right way to go.
