The Chief Executive Officer (CEO) Association of Ghana Industries (AGI), Seth Twum Akwaboah, has urged government to address the multiplicity of taxes paid by industries and the formal sector, especially withholding tax.
Withholding tax is deducted by a formal sector business at source when making payment to another person – informal sector workers – who supply them goods or services, and accounted for later to the Ghana Revenue Authority.
Withholding tax was instituted by government after heeding calls to widen the tax net – which in principle is good, as it allows everyone, especially those in the informal sector, to also pay their taxes.
Unfortunately, the AGI bemoaned, this good concept has rather brought an additional burden to the formal sector businesses since informal sector players do not allow the deduction.
During an interactive session at the 24th Annual General Meeting of AGI members in the Bono, Bono East, Ahafo and Ashanti Regions, which was themed ‘Effects of taxation on industries’, AGI members decried the impact of this tax handle on their operations, since informal sector players are reluctant to accept the deductions.
Speaking to B&FT on the matter, Mr. Akwaboah explained that withholding tax has become an extra burden to producers.
“I think there are also other aspects that are technical, for example the withholding tax. People have expressed concern that when they procure the services of informal sector suppliers and traders, they are unable to get the withholding tax because they complain about it; and for that reason, members have to absorb it, and this becomes an additional burden on them,” he said.
For Mr. Akwaboah, he believes the challenge is the vast nature of the country’s informal sector; and with such a broad informal sector, it will not be easy to bring them into the tax net.
He therefore encouraged government to think about other ways of encouraging them to willingly pay their taxes.
“The withholding tax is a good concept, but perhaps we should have other ways of incentivising the small informal sector operators so that they pay willingly. And if they all contribute, it expands the tax net and reduces pressure on the formal sector that is buying the services of these informal sectors. We need to really look into it so we see how best we can encourage the informal sector to contribute a lot more to tax revenue,” he emphasised.
