The Head of the Accounting Department of the University of Ghana Business School (UGBS), Professor William Coffie, has stressed the importance of a thoughtful and planned method to include informal businesses and individuals to pay taxes.
During a discussion on the 2025 budget, held by Lima Partners on Thursday, March 20, 2025, Prof. Coffie pointed out that formalizing the informal sector can be challenging as many people and businesses operate outside formal systems.
He therefore suggested using financial institutions to help small businesses comply with tax rules.
“With the proposal to establish the Women’s Development Bank, we can use this and other small medium, and micro firms to comply with tax payments.
“We always talk about formalising the tax sector so that many people will pay tax but I ask, how do you formalise a sector that is not formal in its operations? Every year, we talk about bringing in the informal sector but what do we do about it? We keep saying that but there is no effort.
Prof. Coffie suggested that financial institutions like microfinance organizations, the Ghana Enterprise Agency (GEA), and the new Women’s Bank could help small businesses pay their taxes.
“We have a number of these microfinance institutions and agencies such as the GEA, MALOC, and now the Women’s Bank. Why don’t we use these avenues to encourage micro and small businesses to comply with the reporting and record-keeping of their taxes?” he quizzed.
He also called for a reward system for businesses in the informal sector who pay their taxes regularly, arguing that such an initiative will motivate the operatives in the sector to pay their taxes.
“If we (government) say that if a small business or a micro firm could produce their account for three years and continuously show that they are paying their taxes, we are going to support them with a micro-credit as a way to support them, I believe they will comply with their tax obligations”, he said.
Prof Coffie recommended creating a Tax Compliance Index to monitor and encourage tax compliance among small enterprises.
“We can have a Tax Compliance Index for these people. We have academics sitting there. You can ask them to do this to help implement some of these things. It can help with bringing in additional tax,” he concluded.
MKA/EK
