Having a thriving and well-organized maintenance culture in any setting, whether institutional or governmental, essentially inures to the benefit of those who are directly impacted by it.
One of the fundamental activities within an economy’s structure which oils the daily activities and operations is revenue accrued from taxes.
Basically, taxes are the lifeblood for governments and institutions, and it may be safe to say that the structure and financing of a tax change are critical to achieving economic growth.
For small businesses, taxes are a financial and administrative burden that directly impacts their ability to invest in their businesses, employees, and compete in the broader economy.
Ahead of the 2024 budget reading, businesses once again have expressed their resentment especially on the impact of taxes on their businesses. The debilitating impact of these taxes have made most businesses insolvent.
In anticipation of the budget reading, AGI along with some other businesses have called on the government to take a relook at the tax impositions on businesses and the need to expand the tax net.
Corroborating the demands of businesses, Tax analyst, Francis Timore-Boi, conceded that the informal sector is not compliant when it comes to tax payment and that there is the need for the government to focus on that area.
He explained that owing to the complex nature of the informal sector, the government must necessarily devise a way of including them into the tax net.
“The last time I was walking through Makola and they’re not organized. Taxation is based on how much income you’ve earned, if you’re unable to tax those incomes, you’ll go the indirect tax way. Indirect tax affects everybody.
“Yes, we have seen some indirect tax policies that have been rolled out, I personally believe that we need to reshape those taxes…”
Francis Timore-Boi
Justifying his stance, he revealed that in 2018, the government decoupled the VAT from the GETFund and NHIL, which created about a 6% cost component for businesses. Businesses, he explained, are supposed to be producing units because they are not consumers.
“So mostly, if you pass an indirect tax, it’s supposed to be paid by the consumer. But if you allow them to keep those costs, it increases the cost of production, and if they’re unable to pass it on to consumers, at the end of the day you’re crippling the production unit.
“Meanwhile, the tax is supposed to be paid by the consumers. So, we’ve argued that let businesses get a deduction of those cost components and that’s why the businesses are crying.”
Francis Timore-Boi
Recently, accounting and auditing firm, KPMG, released a survey which revealed that currency depreciation, high inflation, interest rates, and the tax environment have had significant negative impacts on business performance in 2023.
These effects have been amplified by severe restrictions on access to credit, difficulties in retaining skilled labor, power supply constraints, and supply chain disruptions.
Ensuring tax compliance within informal sector
Respondents, therefore, recommend a review of a gamut of taxes including the Electronic Transaction Levy, import levies, petroleum levy, and the growth and sustainability levy in the 2024 budget.
Reacting to this, Mr Timore-Boi stated that if there are this feedback from the business community, then it means that some potential challenges came with these taxes when they were introduced.
Largely, he highlighted that they were influenced by the IMF program.
“You realize that 2023 was very heavy on taxes, we rolled out several tax compliance in addition to new taxes. The condition was that there should be medium to long term programs to ensure that we bolster revenue collection.
“So, clearly, we’ve put our hands under the IMF programme, so the taxes were somehow needed because IMF was looking for some metrics and those were not there so they thought that we should either go on full rollout of tax compliance or introduce new taxes and I think that’s what we’re seeing in the business community.”
Francis Timore-Boi
Despite the complexities with the informal sector, the government must, among other things, provide clear guidelines and policy documents to deal with the informal sector. If this is not done, businesses will still continue to have problems and the taxable units in the basket are going to be very small.
For this to be comprehensively attained, sensitization of the business community to make them understand the critical nature of taxes is important.
Consultation by its very nature is relevant in every tax policy implementation, as it engenders compliance in implementation.
READ ALSO: Delegates Urged To Look Beyond Monetary Enticement Ahead Of November 4 Elections
