Economic contraction resulting in business closure and job lost are inevitable in the business landscape. In Ghana’s case, the challenges of the financial sector led to the collapse of 9 banks and 23 savings and loans. Many small scale businesses had their capitals locked up and others losing substantial savings meant for business start-ups, growth and expansion. This had a toll on businesses and the labour market. Interest rates on loans are high and most preferred pocket savings on profit for business growth. The little savings are also locked up.
This had let to many local businesses going bankrupt. Business and individuals with locked up funds must go through cumbersome validation processes with delayed or no payment. Others received a fraction of their savings with no hope of recovering the rest. The banks and the collapse of the microfinance companies contributed to a huge layoffs and job loss in the financial sector. Businesses had no hope of recovering funds to sustain operation and growth. The private sector suffered a huge blow with many of them laying off employees, cutting down salaries and others closing down completely. Small, medium and large scale businesses in Tema, Takoradi, Accra, Kumasi and Tamale are folding up and others relocating to other countries in the region.
Ghana’s SME economy is burdened with taxes. Everything is taxed from raw materials through to production to consumption. Cost of fuel which determine the cost of living is often increased by government irrespective of oil price on the world market. Most tax policies are counterproductive to the business community. High tariffs on electricity, communication, fuel, food and water are affecting local businesses and income.
Entrepreneurs and business men create wealth. When taxes affect their operations, it equally affects their income and employees purchasing power. High and multiple taxes means, businesses have to raise money to pay those taxes and levies. This can be done by increasing cost of products and sometimes reduction of quality of the items produced. When workers cannot live on their income due to poor remuneration, poverty increases.
An overtaxed economy would lead to hardship, crime, low income and high cost of government social programmes. Ghana’s economy and its businesses are facing multiple taxes and clamping down on business when they delay or fail to comply. Government must ensure trust in the financial sector and support SMEs to develop their businesses into those that could employ hundreds and thousands of the teeming youths.
It is important create a business environment that support start-ups with little pocket savings. Multiple and double taxes on business would reduce production and cut employment and it will be prudent to ensure win-win tax reforms economic growth.