John Mahama’s tax relief promise to SMEs not feasible – Tax analyst

A Tax analyst has expressed doubt over the feasibility of a pledge made by the flagbearer of the National Democratic Congress (NDC) in providing tax reliefs for Small and Medium Scale Enterprises (SMEs) if elected into office.

This comes on the back of John Dramani Mahama’s promise to exclude SME’s from paying corporate tax should his party be elected in the upcoming December polls.

Addressing a group while on a regional tour of the Volta and Oti regions last week, Mr Mahama said corporate income tax for medium size companies under his next administration will be reduced from the current 25% to 15%.

“Within the first three months of 2021, I will lay before Parliament several Bills that will seek to grant tax reliefs to SMEs. Effective 2021, small businesses will be exempted completely from corporate income tax. Corporate income tax for medium size companies will be reduced from the current 25% to 15%” while newly established medium-sized companies that employ staff up to 20 will be completely exempted from the payment of corporate income tax for one year,” John Mahama earlier said.

Despite touting John Mahama’s pledge as laudable, Tax Analyst, Timore Francis Boi said the tax reliefs will not be practical to implement due to the current state of the economy.

“It is the doing of it which is the issue. We would love that the informal sector which is mostly made up of the small businesses would be made to pay their actual taxes. The informal sector contributes just about 1% to the total tax revenue so the tax burden is completely imbalanced. So, if he says that for example, he’s going to reduce the tax rate from 25% to 15%, that will be laudable. But the question is can we identify those in the informal sector and allow everybody to pay 15%,” he told Citi News.

“Currently, if you look at the statistics, majority of them don’t pay. And even if they pay, it wouldn’t be the amount of money required by law to be paid. And the GRA is a witness to this. So, if he can move if from 1% to 5%, it will be better than the current situation. But the challenge is whether it is doable. How possible is it? Will we able to bring everybody into the tax net?” Francis Boi quizzed.

He, however, admonished government to step its tax sensitisation efforts for SME’s in a bid to identify them and educate them on paying taxes.

“Tax education is quite low. So, when some people import items and pay taxes at the port, they think that is the total price they are supposed to pay. They don’t even know that there are different categories of tax. Can we enforce the laws as they are? A lot of transactions happen at Makola Market but no one is taxed,” he stressed.