Taxing the night market economy
Business or trading activities in Ghana have traditionally been a daytime enterprise. Market-days in our cities, towns and villages have been daytime events throughout generations. These markets start preparation the night before days set aside in the community as market days. It is also of interest to note that almost all activities in Ghana are daytime-focused. Thus, most state functions are conducted in daytime. State institutions as well as public servants work between the hours of 8:00am to 5:00pm.
We are yet to experience a court sitting at night to adjudicate a matter. In time past, one was likely to be asked “are you a security or a watchman?” when one said he or she was working at night. Society frowned on night activities – or for want of a better expression, nocturnal businesses. Although there’s no specific law banning tax authorities working at night, hardly ever do we see a tax official working in this period of time.
Definition of Night Market Economy
A night market economy refers to a type of formal or informal economy that emerges around markets and various locations at night. These markets are typically outdoor or indoor businesses that operate during the evening and into the wee hours of the morning. It may also be of interest to note that a night market economy may also have ‘underground economy’ embedded in it. A broader outlook of the underground economy generally includes both concealed and unreported legal and illegal activities. Thus, in some cases night markets may operate without proper licences or permits, which can create safety concerns for customers and vendors alike. The Night Economy or the Moonlight Economy describes economic activities taking place in the night after daytime businesses have come to a close.
For the purposes of this article, a night market economy is considered to be economic activities undertaken daily between the hours of 6:00pm and 5:00am. Ghanaian business activities in the recent past appear to have shifted from the predominantly daytime activity to night-time. There are certain parts of the country that operate better at night than day. There are also areas where businesses operate twenty-four (24) hours around the clock – literally “no sleeping” in such communities.
Night Business Operations
Business activities at night covers almost the same activities undertaken during the day. These include: Sporting, Leisure and Gaming Activities like Casinos, Leisure Venues, Fitness Clubs, Spas, etc. Others are Hotels, Restaurants and Accommodation in Brothels, Motels, Guest Houses, Food Pubs, Bars, Movie Houses, Culinary Class, Private Dining Room and Pop-Up Restaurants etc. There are also Night Retail, Wholesale and Services like Courier, Vehicle Rentals, Haulage, Malls and Supermarkets. While Events and Entertainment like Outdoor Cinema (e.g., Park and Watch), Music shoes, Theatre, Comedy, etc.
Night Market Economy and Tax Related Crimes
The Night Market Economy has been identified as one of the current trends in tax-related crimes. Tax crime or fraud can be defined as illegal institutional, administrative and operational means put in place by companies, organisations and individuals to deny the state tax revenue. The crime is not the fact that a company or individual is doing business in the night, but the motive and calculated effort not to pay taxes to the state. The main aim may be inclined toward doing business in the night and dawn to outwit tax authorities.
It is therefore important that the Ghana Revenue Authority fashion-out strategies to meet the current trend of ensuring that all businesses conducted at any time are roped into the tax net. The GRA can also collaborate with other state agencies in fighting tax-related crimes to ensure increased tax revenue. The sharing of intelligence, real-time access to a common data base platform, consistent training and refresher courses on tax crimes, and strengthening the legal frameworks to ensure proper collaboration as well as limiting institutional obstructions would be of great help in this fight.
Significance of the Night Market Economy
The Night Time Economy (NTE) or Night Market Economy (NME), as interchangeably used, are increasingly important subjects of interest to policymakers, private businesses & public agencies and the wider community due to its benefits and contributions to the economies world over. The Night Market Economy (NME) can be an important economic model within a country because of its dynamism, diversity, and density of activities and tax revenue potential.
The Ghana Revenue Authority (GRA) has thus deemed it necessary to formulate the necessary strategies of bring these businesses into the tax bracket. Other social benefits of the Night Market Operations include:
- Recreation for people, which is often welcome after daytime work
- Increased employment
- Innovation
- Entrepreneurship
- Increased vitality
- Regeneration of urban cities
The Night Economy is a special model of night activities which are a good extension of daytime economic enterprise. If integrated into the cultural characteristics of our business world, it will create the economic vitality desired to enhance economic growth. The Night Economy increases entrepreneurial opportunities and may prolong consumption time of consumers.
Taxing the Night Market Economy
Taxation of the Night Market Economy can be a complex issue as it involves a huge number of small-scale vendors, many of whom operate on an informal basis. However, there are also large and medium-size formalised businesses which operate in the night market economy whose tax revenue cannot be ignored. It can also be an important source of revenue for local governments, and can also help to formalise the sector and ensure vendors are operating legally and safely.
The Night Market Economy may have activities that are legal or illegal. There is a series of activities at night that are considered illegal and christened Black Market, Shadow or Underground Economy. This economy is considered illegal either because the goods or services traded are unlawful or done without complying with government reporting requirements. That notwithstanding, tax is payable by a person who has a chargeable income for the year of assessment as posited by the Income Tax Act, 2015, Act 896 as amended, sec 1(1)(a). Accordingly, VAT can also be charged on these businesses if they are not exempted as per Schedule 1 of the Value Added Tax Act, 2013, Act 870 as amended. Since the business activities at night yield income, the taxing authority is expected to put in measures to ensure voluntary compliance with the tax laws.
The Ghana Revenue Authority should thus spread its tentacles into the night. There are some who operate at night but are yet to register with the authority for tax purposes. These should be reached as soon as practicable to exact taxes from them. There are other businesses that may pose a challenge to GRA in administering the current tax types which have been deployed. This may call for innovation and implementation of Modified Taxation, like the presumptive tax, to get those operating Street Bars to pay taxes. The mode of payment should be made easier and convenient for these entities. The need for intensive education as well as enforcing tax laws will ensure a successful ‘Night Tax Operation’.
In Accra, places like East Legon, Osu/Oxford Street, Spintex, Tudu, Okaishie, Tema, Weija, North Kaneshie, Dansoman and others, just to mention a few, are reaping the benefits associated with night markets. The night life is bubbling and thriving, thus the need for effective and coordinated action for revenue mobilisation. The night markets afford the revenue authority an opportunity to widen the tax net.
Conclusion and Way Forward
Overall, the Night Market Economy (NME) is an important aspect of many local economies, providing opportunities for entrepreneurship and cultural exchange. However, it is important for governments and local authorities to regulate night markets to ensure they operate safely and fairly. The NME from empirical studies/research across the globe has proven to be another layer of revenue sources if properly monitored and harnessed. The GRA using its Area Offices dotted across the country, with support from the various MMDAs, can leverage this night market economy to increase and widen the tax net to improve on the country’s tax to GDP ratio. We should not be surprised if we see staff of GRA visiting these operators at their business premises at night in the coming nights. Every pesewas counts, and remember “our taxes, our future”.
References: 1. GRA Night Market Operational Guideline, 2023, 2. Messrs. Kwasi Boama-Amofa, David Quarcopome, Joseph Adjeikwei Annan, Alpha Senanu Hossoo of the GRA’s Night Market Economy Project Committee. 3. Compliance, Enforcement & Debt Management Manual, 2018. 4. Revenue Administration Act, 2016, Act 915 as amended 5. VAT Act, 2013, Act 870 as amended. 6. Income Tax Act, 2015 Act 896 as Amended 7. Fighting tax related crimes in the midst of COVID-19 – The Business & Financial Times (thebftonline.com)
The writers are staff of the Ghana Revenue Authority (GRA) with the Accra Central and Accra East Enforcement Units respectively. They are members of the Chartered Institute of Taxation – Ghana (CIT-G). They can be reached on Tel No. +233 24 454 2671/ 24 220 5435 or Emails: francis.daah@gra.gov.gh /nathan.danquah@gra.gov.gh