In a bid to encourage voluntary compliance and reduce the cost of tax administration, the Private Enterprise Federation (PEF) is proposing the adoption of a tiered tax system for businesses.
The President of PEF, Nana Osei-Bonsu, at the launch of a research report on tax reforms for MSMEs, said: “Ghana needs to adopt a tiered tax system which reduces the tax burden on businesses, especially Micro, Small and Medium-Sized Enterprises (MSMEs), to encourage voluntary compliance and reduce the cost of tax administration.”
Findings from the report indicated that a tiered system of taxation would result in an increase in the taxpayer population.
“Issues about the segregation of taxpayers are still outstanding and need to be addressed to provide certainty for business planning and continuity. The scenario analysis provides good options for policy makers to choose from, considering their potential impact on tax revenue mobilisation,” the report said.
The report further noted that MSMEs are willing to pay tax if they understand what is expected of them under the tax laws and if the cost of compliance is minimal.
Increased compliance would lead to an increase in the taxpayer population and consequently boost tax revenue, the report stated.
Nevertheless, PEF noted that the success of the recommendations proposed in its study depends on the ability of the Ghana Revenue Authority (GRA) to reform its administrative systems effectively, and to innovatively embark on tax education and awareness creation in partnership with business associations and other civil society groups.