QUESTION OF THE DAY
Why Are Small Businesses In The Gambia Collapsing?
How Could The Revenue Authority Contribute To Their Survival?
Revenue generation is the fundamental objective of a revenue authority. Companies which are in ruins cannot generate income. Hence how an environment could be created which would make companies to grow should be of concern to a revenue authority. This is why GRA should emulate PURA which conceived and created what it called a consumer parliament. GRA should also establish a tax payers ‘parliament to sound the views of the tax payers.
In this way it would be able to know why small businesses are collapsing.
In terms of state economic and fiscal policy small businesses are significant for three purposes. They are to generate employment, contribute to social security and pay taxes for public sector investment.
Businesses start to collapse when earnings fall short of salary, social security and tax requirements. A review of the cases before the industrial tribunal would reveal that many companies are closing down with arrears in wages of social security contributions.
Tax reform is therefore extremely urgent if Government is to secure its revenue base.
First and foremost, all levies that are not linked to income generation, such as the education levy should be removed. Levies are like head tax. It is imposed on the weak and the strong without distinction.
Secondly, small businesses spend too much on auditing exercises. Companies which depend on bank overdrafts to meet their obligations have nothing for the state to gain by imposing exercises for them to perform which only increase expenditure. Instead, the revenue should rely on auditing firms as consultants which would have the duty to audit the account of each company in their first year of operation to determine the grade of the company and its tax obligation. It could then be given a grace period of paying the same tax for five years before being subjected to auditing to determine whether or not the grade should change.
There is no doubt that by now the revenue authority knows the earning capacity of small businesses and could proceed to grade companies based on their earning capacities and fix tax rates for them to pay.
Thirdly, special accounts could be opened in Banks by the revenue authority for businesses to pay on the basis of their tax identification numbers.
These reforms would enhance collection and tax compliance.