Vice President Mahamudu Bawumia had asked the Ghana Revenue Authority (GRA) to design and implement a modified taxation system to enable the large informal sector of the country’s economy to pay their tax to the State without stress.
Vice President Bawumia said while the government works to create a conducive environment to simplify the tax assessment and reduce the cost of compliance to large taxpayers, there is also the need to streamline enforcement and compliance at the retail and micro levels.
Dr Bawumia, who made the call on Wednesday at the Revenue Assurance and Compliance Enforcement (RACE) launch in Accra, said that the retail and micro group — market women and artisans in the informal sector— are potential taxpayers outside the scope of RACE.
“For these group of citizens, the issue is not with their tax evasion or tax avoidance. Their non-compliance may have more to do with their tax education and how assessment and collection are enforced.”
“Let us find simpler ways to encourage tax compliance at this basic level,” he urged the GRA.
Referring to a recent study by the World Bank (November 2020) that said potential tax revenues from sole proprietors in the informal sector could amount to 12.6 per cent of GDP, Dr Bawumia urged the Ministry of Finance and the Ghana Revenue Authority to consider the particular characteristics of the informal sector when designing the proposed modified taxation system.
He said the difficulty with the collections of taxes from the informal sector also had to do with education and poor record keeping. “Asking such businesses to provide records for the last three or four years for an audit is an exercise in futility and will be perceived as harassment.”
As a result, the Finance Ministry and GRA have to simplify their income or profit tax assessment.
One option, Dr Bawumia said, is using a flat tax regime under a modified taxation system to cover micro and small enterprises that should cover most women retailers and many in the informal sector.
“For medium-sized enterprises, there could be the option to submit to conventional tax assessment at the corporate tax rate or opt for a flat tax based on turnover under a modified taxation system.”
But for the micro and small enterprises, Vice President Bawumia proposed that “We must leverage technology to simplify the collection and payment of the 3 per cent flat tax. We believe that a simplified flat tax will allow more people at the retail level to better assess their tax obligations and make payments without too much human interface and a rigorous auditing system.”
Rex Mainoo Yeboah, ISD
