Editorial: MSMEs need a tiered tax framework for better compliance


Broadening the tax base with a view to improving domestic revenue mobilisation has been advocated as an important policy option to boost.

According to a new research conducted by the Private Enterprise Federation and sponsored by the Open Society Initiative for West Africa (OSIWA) project, Micro, Small and Medium Enterprises (MSMEs) in the country contribute a minute 4 percent of domestic tax revenue – despite making up about 92 percent of registered businesses.

This can be broken down to say of the GH¢30billion mobilised in 2019 as domestic revenue, only about GH¢1.2billion was generated by MSMEs.

According to the research, the tax administration system implemented for MSMEs makes it difficult for these businesses to comply as there is no discrimination in terms of requirement expected of them and for big businesses.

For example, all MSME taxpayers are subject to the same Company Income Tax rate of 25 percent, Value Added Tax, Customs and Excise Tax obligations – just as is required of larger businesses.

Additionally, tax education is poor among MSMEs as many complain they do not understand what is expected of them by the tax laws and related administrative provisions; and since their returns are insignificant, the majority of them cannot afford hiring tax consultants as the big entities do to undertake relevant tax education.

To this end, the Private Enterprise Federation is proposing a multi-tiered and optional tax system for MSMES. For instance, small businesses with turnovers below GH¢90,000 should be required to pay a lump-sum final income tax, so as to not be required to pay any further income tax until they move into higher income levels.

It also recommends that entities which qualify for presumptive tax should not be subject to withholding tax, as this will ensure those small businesses have access to all their funds for operating their businesses.

This should enable the struggling MSMEs to grow and create jobs and wealth. CEO of the Private Enterprise Federation, Nana Osei Bonsu, believes it will be a win-win situation for both small businesses and government if the tax administration system is reformed.

If MSMEs are required to pay tax, it should be graduated and not pose a financial burden on the entities so as to stifle their growth and ability to grow. PEF’s recommendation makes a lot of business-sense that it’s probably why their contribution to domestic tax is so negligible.


EPA must perform its regulatory functions without fear or favour

The newly-appointed Executive Director of the Environmental Protection Agency (EPA), Henry Kokofu who assumed office in August this year, has being engaging various stakeholders to acquaint himself with his new role and gain a deeper understanding of critical sectors regulated by the EPA.

Our interest centres on the recent meeting with leadership of the Ghana Chamber of Mines, where he underscored the importance of institutional collaboration between mining industry players and the environmental regulator.

The discussion bordered on interactions between the agency and mining industry, underscoring the fact that it should be characterised by a high sense of responsibility to improve the environmental sustainability and productivity of mining companies.

Mr. Kokofu indicated that the agency is in the process of reviewing the EPA Act, 1999 (Act 490), and related Legislative Instruments to effectively enforce environmental management across sectors. This, we believe, is in line with the global target of promoting sustainable development goals as outlined by the United Nations Development Programme, of which our president is an eminent advocate.

While the mining sector is an important contributor to the country’s economic fortunes, there is equally a need to regularly engage players in the sector to ensure their operations do not have deleterious effects on the environment and communities.

There is a lot of devastation in the country that has been caused by mining activities which have not been recovered such as by reclamation – in which we believe the EPA has been very ineffective. It is therefore our considered opinion that the EPA should be more forthcoming and insist mining coys are responsible and ensure their activities do not cause too much environmental damage; and after a concession is spent, the degraded portions are reclaimed and planted with trees and vegetation to ensure sustainability.

Mining adversely affects the environment by inducing loss of biodiversity, soil erosion, and contamination of surface water, groundwater, and soil. The leakage of chemicals from mining sites can also have detrimental effects on the health of populations living at or around the mining site.

Mining also causes water pollution – which includes metal contamination, increased sediment levels in streams, and acid mine drainage. We therefore expect the EPA to strike the balance and ensure mining activities do not unduly have detrimental effects on the health of populations in mining communities, as well as the environment as a whole.

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