Government is an integral part of every business activity in a given country; like the surrounding environment it provides the macro economic effects that each business has to endure. In Liberia, by comparison to the region of West Africa, the tax bracket is constrainedly high at thirty five (35%) of revenue earned for corporate businesses.
It is perhaps a good proverb to ask why the business entities have to pay such a huge amount. Why is the cost of doing business this high? The answer may seem oblique, that besides the devastation suffered under the prolonged civil war, which left virtually all infrastructures ruined, very few businesses are currently paying taxes to the government. The latter is more affluent to our business setting today as a positive increase in the number of businesses paying taxes will result in a legitimate claim for lowering the tax rate.
With few firms bearing the burden of the majority of the population, it creates an inverse triangle effect which cannot hold balance. This eventually results in overreliance of donors as government requires funds to play its role. To encourage Liberia to be more self sustaining, the large number of informal sector has to cross bridge and be formal. Moreover the formal business sector has to be upfront in paying their taxes to form a substantial coffer that can meet government demands. As the cost of doing business goes up, the more expensive the final product will be, resulting in lower sales; since prices are inversely related to demand, the higher the price the lower the demand and vice versa.
Examining some of the government responsibilities that affect businesses, it will underscore the importance of these services. Security is essential both for the enterprise and its products but also for the human life that conducts the business. With the prone gang attacks that are becoming the norm in Liberia, entrepreneurs are holding back with their investments as they wait to see if the security situation will improve. This is a drawback as each suppressed investment also reduces the potential for government earning and job creation.
Poor infrastructure such as pot-holed roads, also increase the cost of doing business as it takes long to deliver produce, arrive at work and costs more to maintain business vehicles. Government is also tasked to create a level playing field, monitor fair trade practices, and avoid environmental pollution and exploitation, among other responsibilities that provide businesses with an opportunity to produce goods and services as demanded by the market.
Government rules and regulations affect the way we all conduct our businesses, they can also be the determinant of profit or loss or even expansion or contraction depending on how they are tabulated. Given the vital roles that government plays in ensuring that infrastructure such as roads, electricity, water, communication, security are available for our businesses, it would be a welcome relief if more businesses both small and big paid their tax dues. The multiplying effect of these will in the long run result to lower cost of doing business for all entrepreneurs in Liberia. Just like we have high government expectation and hold it accountable, let business firms also create a culture of readily paying the tax collector what is due to him. Remember responsibility starts with me before others.