Graphic Business-Stanbic Bank Breakfast Meeting: Tier corporate taxes for greater compliance - PEF
The President of the Private Enterprise Federation (PEF), Nana Osei Bonsu, has called for a tiered corporate tax system that will allow businesses to pay their corporate taxes based on their sizes and profit margins.
He said the one size fits all system which required every business to pay 25 per cent of their profit as corporate tax was not favourable to small and medium enterprises. It also inhibits their potential to expand to create more jobs.
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Speaking at the Graphic Business/ Stanbic Bank Breakfast Meeting, he said 25 per cent out of a profit of GH₵2,000 profit would be more impactful to a business than 25 per cent of a profit of GH¢2 million.
With the informal sector which is largely dominated by small businesses, contributing about 86 per cent of employment in the country, he said, implementing a tiered corporate tax system would enable them to expand and employ more hands.
The second quarter breakfast meeting which was held on the theme ‘Tackling Unemployment to Create Wealth; Opportunities for Ghana’, brought together people from academia, researchers, policymakers and industry players.
Impact of taxes on SMEs
Nana Osei Bonsu said PEF and some partners conducted some research on taxes and its impact on small and micro institutions and came to the conclusion that the one size fits all system of taxation was not a good approach.
“We should allow the small companies which earn income of up to GH¢100,000 to pay two per cent, then those from GH¢200,000 can pay let’s say five per cent, and take it up in that order,” he stated.
He said this would not only help the small businesses to grow but would also help make them tax compliant.
“Affordability is a key factor in tax compliance. People set up their businesses to make money and not to pay taxes. So if it’s between allegiance to paying taxes and allegiance to their businesses, they will go with their business.
“And if you say you will establish tax courts and imprison them, that will not take us anywhere. What you will end up doing is collapse their businesses, jobs will be lost and the government also loses revenue,” he explained.
He said PEF was, therefore, working together with the Internal Revenue Division of the Ghana Revenue Authority to appreciate that the private sector was willing and ready to pay taxes but would only pay what they understood.
Leveraging the informal sector
Speaking on the topic, ‘Avenues for job and wealth creation’, Nana Osei Bonsu stressed the need for the system to leverage the informal sector to create more jobs for the economy.
“The informal sector is 86 per cent so if you are doing any analysis to create jobs, you must look at the informal sector. We need to encourage them, provide the resources, competencies and capacities so that they can create jobs.
“Nobody sets up a business to create jobs, they set up businesses to make money and by making money, they will need more hands and expand, the economy will grow and more people will be employed,” he stated.
He said the government must, therefore, lead the design of a policy that would allow this to happen.