The Private Enterprise Federation (PEF), has asked government to adopt a tiered tax system to reduce the tax burden on businesses, especially Micro, Small and medium sized enterprises in the country.
According to PEF, this will help government generate adequate revenue, encourage voluntary tax compliance and reduce the cost of tax administration in the country.
As of 2016, data from the Registrar of Companies at the Registrar General’s Department indicated that even though MSMEs make-up about ninety-two percent of registered companies they contribute only about four percent to the country’s domestic tax revenue.
Speaking at the launch of the PEF/ OSIWA research into Ghana’s tax regime and the need for reforms in taxing MSMEs, the Chief Executive Officer of PEF, Nana Osei Bonsu, said it is important for tax rates applicable to MSMEs to be reduced in addition to massive tax education by the Ghana Revenue Authority for taxpayers.
“What we are advocating for, is for government to make it easy for businesses to pay their taxes. If we want to increase the tax revenues to government, there should be more tax payers paying their taxes. But that is not the case. If you lower the tax rate, more people will be willing to pay,” he said.
He also argues that the corporate tax system is grossly unfair especially to Small and Medium Scale Enterprises, as they are forced to pay the same 25 percent flat rate paid by large and profitable businesses.
“Our tax rate compared to our neighbours is very low. Already, 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 to 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,” he said.
Nana Osei Bonsu also asked government to consider a system which is in line with international best practices as it will ease the compliance burden on businesses.
PEF / OSIWA RESEARCH
The research by the Private Enterprise Federation (PEF) was in collaboration with the OSIWA-Project.
It revealed that 69.7% of Micro, Small, and Medium-scale Enterprises (MSMEs) operating in urban centers compared to 91.3% in the rural areas are not aware of the laws guiding taxation of businesses.
This, it attributed to the lack of education and awareness.
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.