Taxes choking MSMEs

tax burden on businesses

The tax burden on businesses has been described as excessive by Associate Director, Tax Advisory Service at KPMG, Michael Boateng, who says that most medium- and small-scale enterprises (MSMEs) are also paying double taxes.

The majority of MSMEs in the country, he explains, lack knowledge of tax laws and as such do not keep records; a situation he says persists even after they have religiously filed their annual returns, as they are mostly found wanting when tax officials call on them. And because they are unable to provide their operational and transaction details, he says they often end up paying some additional, unwarranted charges.

“There are several instances in which when doing tax audits you will realise some businesses are paying certain taxes they are not supposed to pay, because they are not in that category or have paid it already in another form; but because they do not keep records and lack the knowledge, when tax officers come after them they end up making payment again,” he said.

Speaking on the topic Strategies to optimise the potential impact of the IMF programme on businesses at the Ghana National Chamber of Commerce and Industry’s (GNCCI) dialogue series in Accra, the tax expert said while it is imperative for businesses to seek expert advice on tax-related issues in a bid to cut down cost as well as ensure proper record-keeping, the Ghana Revenue Authority (GRA) must do more in sensitising taxpayers.

Though he lamented there are several businesses which are going down due to non-compliance with tax rules, he added that businesses are overburdened with taxes and must be able to dialogue with government to introduce initiatives to widen the tax net without further burdening the few compliant ones.

On his part, Director-Institute of Statistical Social and Economic Research (ISSER), University of Ghana, Prof. Peter Quartey, speaking on the topic ‘Understanding the IMF programme including its potential risks and opportunities’, urged businesses to adopt cost-cutting initiatives, create partnerships, focus on increasing efficiency and find alternative revenue streams.

Waning investor confidence

National President-GNCCI, Clement Osei-Amoako, taking his turn mentioned that the economic situation in which the country finds itself has led to high levels of uncertainties, waned investor confidence, rising inflation, weak local currency, high policy rate translating into high cost of borrowing, unsustainable debt, and impaired economic growth among others, which are all affecting businesses negatively.

The Chamber therefore urged government to work with the central bank to find innovative ways of addressing high inflation in the economy to enable businesses secure funds for expansion and recovery from the impact of COVID-19.

More importantly, it wants government to find innovative ways of increasing the efficiency of tax administration and expanding the tax net, rather than introducing new taxes and increasing tax rates.

“The negative effects of tax policies and reforms on businesses are clearly evident in recently released reports. The Chamber urges government to carefully examine the sectoral contribution to GDP and not overly-emphasise the reported 4.2 percent growth in first-quarter 2023,” he said.

He emphasised that a thorough analysis of the report suggests that while the public sector is expanding, the industrial sector is contracting – a situation he said is risky to sustainable growth of the economy.

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