Tax regime not fair to SMEs – PEF

BY: Suad Yakubu & Gifty Owusu Kwarteng
Stakeholders in a meeting
Stakeholders in a meeting

The Private Enterprise Federation (PEF), has described as unfair the country’s tax regime, which slaps equal rates and bands on both big businesses and micro, small and medium enterprises (MSMEs).

It observed that the present practice of applying the same tax rates to all corporate entities made it easier for the smaller businesses to want to evade taxes.
 
Subsequently, the Lead Consultant and Chief Technical Tax Expert of PEF, Mr Isaac Nyame, has called for a segregation of the tax system in a manner that will take into account the income generated by the corporate tax payers and their general ability to pay.

 He made the call at a stakeholders consultative meeting on tax reforms in Accra on October 31.

“There is the need to realistically define MSMEs.

They are unique businesses and must not be taxed together with bigger companies,” Mr Nyame said at the meeting.

He explained that the Ghana Revenue Authority (GRA) needed to create a tax system exclusively for MSMEs, which are said to account for over 80 per cent of registered businesses in the country.

Realistic threshold
 
Mr Nyame underscored the need for the GRA to define realistic thresholds for the MSMEs.

He explained that the small taxpayer’s threshold pegged at GH¢90,000 was not realistic enough.

According to him, the figure was in conflict with the standard value added tax (VAT) registration threshold of GH¢200,000

“If small taxpayers are required to pay GH¢90,000, then the GH¢ 200,000 VAT registration mark is conflicting and not realistic enough.

We want a kind of uniform threshold,” he said.

Tax compliance challenges

He said data available to the federation indicated that of the 92 per cent MSMEs registered at the Registrar General’s Department (RGD) in 2016, only four per cent paid taxes.

That, Mr Nyame, attributed to low tax compliance on the part of taxpayers.

“Statistically, low tax revenue contribution by the SMEs may be an indication of low tax compliance culture, either because they do not know or the tax system is too cumbersome,” he said.

He mentioned poor record-keeping, lack of skilled staff and low staff population as other challenges faced by MSMEs in honouring their tax obligations.

Those challenges, he said, led to reluctance by those entities to pay their taxes. — GB

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