Monday, 19th September, 2022 (1)

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Small and Middle-Sized
Enterprises (SMEs)
constitute an essential
part of the economic
ecosystem in all parts
of the world. Morden day SMEs
are genuine solvers of societal
challenges such as driving
regional growth, curbing
urban population, providing
employment and contributing to
environmental sustainability.
According to available data
from the Registrar General’s
Department, 92% of businesses
registered in Ghana are SMEs,
employing 70% of the population.
However, much has not
been talked about concerning
the plights of SMEs in Ghana,
The Chief Executive of
the Ghana Investment
Promotion Center
(GIPC), Yoofi Grant,
has noted that Ghana’s
exports to Canada have increased
significantly in the past 25 years.
According to him, Ghana’s
exports, including cocoa, rubber,
processed fruits, nuts, and
aluminium to Canada increased
at an annual rate of 9.51%, from
US$8.3 million in 1995 to US$72.2
million in 2020.
On the other hand, major
imports from Canada into Ghana,
such as heat, cars, used clothing,
excavation machines, and
poultry, increased by 8.97% in the
same period.
He called on Ghanaians
in the diaspora to come back
home and take advantage of the
opportunities available.
The GIPC boss was speaking
at the opening of the Ghana
Canada Investment Summit
(GCIS) in Toronto Canada, on
Thursday, September 15, 2022,
according to norvanreports.com.
Business
SMEs in Ghana require taxcapital
investment to Sustain
Business Growth – Economist
Yofi Grant, CEO of GIPC
which is tax-capital investment
decisions. SMEs in Ghana
operate in a tax space requiring
investment decisions to go
beyond raising only investment
capital.
In starting SMEs in Ghana,
entrepreneurs are often keen on
raising capital for the business
without recourse to future tax
liability that may arise and be
paid.
Businesses registered in
Ghana must operate within the
confinement of the income tax
Act 896, Value Added Tax Act 870,
the Revenue Administration
Act 915, Customs Act 891 and
their respective regulations.
Most SMEs in Ghana either
Ghana’s exports to
Canada outweigh
imports in the last
25 years – Yofi Grant
“It is our belief that by
the close of this summit all of
you will feel attracted to the
idea of coming back home not
necessarily to stay but to help
make Ghana stronger and better
through strategic partnerships
and long-term investments,” he
is quoted by norvanreports.com.
“Currently, the two-way
merchandise statistics between
Ghana and Canada has reached
over US$475 million, representing
a 71% increase over the figure
recorded in 2020,” he said.
“Clearly, trade between the
two countries is growing,” he
added.
Touching on why Ghana is a
good destination for investment
and business opportunities,
he noted that the country is
rich in resources such as gold,
manganese, bauxite, and even
lithium, with agriculture
being its bedrock and driving
industrialization.
“That is why we say – come
grow in Ghana – grow with
Ghana,” he added.
DAILY ANALYST Monday, 19th September, 2022
do not carefully evaluate the
impact of these tax laws on their
businesses or ignorantly trade at
the blind side of the tax laws in
Ghana.
The capital base of SMEs must
be tax absorptive in the early
stages of business development.
The early stages of most SMEs
development are characterized
by low turnover to cover the
cost of sales and administrative
expenses, high level of
receivables, bad debts, high
operational costs, competitive
market dynamism, low pricing
strategies etc.
However, for instance, the
VAT act does not relieve a VAT
registered person from VAT
liability for taxable supplies
regardless of whether the sales
were made on credit except for
exempt and zero-rated supplies.
Likewise, except for section 7 of
Act 896, the income tax Act will
not relieve a person from income
tax liability once income has
been earned.
Therefore, SMEs are
responsible for raising capital
above investment needs
deliberately. In some cases,
the cash effect of taxable
transactions lags while the tax
compliance period is shorter,
creating the tax financing gap.
Most SMEs frequently try to
finance this gap by filing returns
The Minister for
Communication
and Digitalization,
Ursula Owusu Ekuful,
has proposed that
financial technology (Fintech)
industry players should design
a common electronic payment
without payment, not registering
with the Ghana Revenue
Authority, or through short-term
borrowing.
Furthermore, having a capital
base that is tax absorptive
enough reduces tax and pension
contribution compliance risks,
which become a financial burden
on most SMEs in Ghana in their
early stages.
This means of planning is the
cheapest channel for meeting
statutory obligations for SMEs.
Moreover, the uncertainty in
the tax environment may render
SMEs into capital depletion if
the capital base is not taxed
absorptive. The recent VAT
amendment, which restricted
a flat VAT rate of 4% to retailers
within the annual threshold
of ₵500,000, means customers
have to determine whether to
buy from suppliers within this
threshold and pay VAT at 4% or
suppliers above the threshold
would have to absorb the
standard VAT rate of 12.5% to able
to serve the existing clients at
the current margin.
Statutory compliance is
card for Africa that will enable
payments to eradicate the usage
of international payment cards
such as Visa, Mastercard, etc.
According to her, Africans
must not be made to pay service
charges to these international
brands when Fintechs in Africa
costly; SMEs must endeavour to
avoid this risk and its associated
penalties and interest by
anticipating and projecting
such liabilities in their earlier
business cash flow projections,
especially during the uncertain
turnover period.
Again, Investors must
appreciate and understand
the statutory space within
which SMEs operate to
enhance compliance. Statutory
compliance requires proper
financial planning and
stakeholders’ support.
Failure to observe statutory
compliance can result in extreme
case criminal prosecutions
in Ghana and avoidable legal
charges that may even discolour
the organization’s image. The
Ghanaian tax laws are immune
to any explanations and excuses
or business difficulties regarding
payment of tax liabilities.
Author: Isaac Yalley,
Tax Economist at the
Institute for Liberty & Policy
Innovation (ILAPI) with Interest
in fiscal research and Public
Policy for economic freedom.
FinTechs urged to develop
international e-payment cards as
substitute for Visa, Mastercard – Ursula
Ursula Owusu-Ekuful, Minister of
Communications and Digitalization
have showcased their ability to
create these innovations.
“Why can’t we develop our
own local and continental cards
and reduce the fees for our
people and also keep all of that
money within the continent
to finance our development,”
she asked according to
norvanreports.com.
“We have done it with mobile
money, and I believe we can do
it with e-payment and credit
cards,” she said.
The Minister made the call
when she delivered a keynote
address at the Ghana Canadian
Diaspora Investment Summit
in Toronto, Canada, organized
by the Ghana Investment
Promotion Center (GIPC) under
the theme, “Grow in Ghana, grow
with Ghana”.
Ursula also noted that
just like social media and the
internet were not so popular
some years ago, blockchain
currencies may become
very common in a few years,
therefore urging Africans to
start exploring the digital space.
“In the same vein,
cryptocurrencies that are now
illegal may very well become
the norm many years down the
line,” she said.