A tax analyst, Timore Francis Boi, has doubted the feasibility of the National Democratic Congress’ Flagbearer, John Dramani Mahama’s promise to provide some tax reliefs for Small and Medium Scale Enterprises (SMEs) when voted into power.
On Wednesday, August 19, Mr. Mahama disclosed that he will exclude SMEs from paying corporate income taxes when given the nod to become President.
He said, “Within the first three months of 2021, I will lay before Parliament several Bills that will seek to grant tax reliefs to SMEs. Effective 2021, small businesses will be exempted completely from corporate income tax. Corporate income tax for medium size companies will be reduced from the current 25% to 15%” while “newly established medium-sized companies that employ staff up to 20 will be completely exempted from the payment of corporate income tax for one year.”
But Timore Boi believes although these tax reliefs will be good for the SMEs, it would not be possible to implement them looking at the current situation of the economy.
“It is the doing of it which is the issue. We would love that the informal sector which is mostly made up of the small businesses would be made to pay their actual taxes. The informal sector contributes just about 1% to the total tax revenue so the tax burden is completely imbalanced. So if he says that for example, he’s going to reduce the tax rate from 25% to 15%, that will be laudable. But the question is can we identify those in a informal sector and allow everybody to pay 15%.”
“Currently, if you look at the statistics, majority of them don’t pay. And even they pay, it wouldn’t be the amount of money required by law to be paid. And the GRA is a witness to this. So if he can move if from 1% to 5%, it will be better than the current situation. But the challenge is whether it is doable. How possible is it? Will we able to bring everybody into the tax net?” he wondered.
Mr. Boi further challenged the government to sensitize Ghanaians with Small and Medium Scale Enterprises, insisting that a comprehensive system must put in place to identify all SMEs and educate them on the payment of tax.
“Tax education is quite low. So when some people import items and pay taxes at the port, they think that is the total price they are supposed to pay. They don’t even know that there are different categories of tax. Can we enforce the laws as they are? A lot of transactions happen at Makola Market but no one is taxed,” he lamented.
Calls for review of tax exemption laws
Many analysts have over time complained about the effects tax exemptions have on the economy, with many of them calling for a review of the laws governing this act.
It was revealed in 2018 that the Ghana Revenue Authority (GRA) was working to review Ghana’s tax exemption laws to address revenue losses.
The GRA’s plan was to minimize the number of exemptions that are granted to help the government meet its revenue targets.
Meanwhile, in 2019, the Finance Minister, Ken Ofori Atta, disclosed that the government had began a review of tax exemptions for companies operating in the country.