Equity Crowdfunding Series (7): From charity to capital: Why we should use tax policy to back its innovators

…An open letter to policymakers, parliament and the public

By Dr. Sammy CRABBE

In the previous article, we argued that decentralised equity crowdfunding cannot scale or survive without legal integration. Trust, we noted, does not emerge from technology alone. It must be anchored in law, regulation, and institutional credibility. That argument naturally raises a more practical question: how should the state actively support equity crowdfunding as a viable channel for funding innovation, rather than merely tolerating it?

The answer lies not in coercing banks, creating new funds, or expanding politically exposed lending programmes. It lies in tax policy.

Every new government in Ghana eventually repeats the same ritual. Banks are summoned to the Jubilee House. Photo opportunities are taken. Strong language is used about “supporting local businesses.” Yet nothing fundamental changes. Banks remain rational actors, bound by fiduciary duties to depositors and shareholders. They price risk accordingly. High interest rates are not a moral failing; they are a market signal. Early-stage ventures are, by definition, uncertain. They are not bankable in the traditional sense.

The uncomfortable truth is that banks cannot be ordered to fund risk, and pretending otherwise only delays inevitable disappointment.

Advanced economies resolved this problem long ago—not by forcing banks to behave irrationally, but by redirecting private capital into risk-bearing equity. The United Kingdom offers one of the clearest examples through its Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS). These programmes recognise a simple economic reality: if society wants citizens to invest in high-risk, early-stage companies, the state must share part of that risk.

The results are not theoretical. Since their introduction, EIS and SEIS have channelled tens of billions of pounds into tens of thousands of businesses, turning ordinary citizens into early-stage investors and helping to build some of the UK’s most innovative companies. These schemes did not replace markets; they deepened them. They did not distort incentives; they aligned them.

Ghana already accepts the underlying principle.

Under the Income Tax Act, 2015 (Act 896), individuals and companies may deduct 100 percent of donations to charitable organisations from their assessable income. In effect, the state already agrees that certain uses of private capital deserve tax recognition because they serve the public good. The policy question now is whether that recognition should stop at charity—or be extended to productive investment.

Instead of allowing tax deductions only for money that leaves the economy permanently, Ghana can allow similar deductions for equity investments in qualifying small and medium-sized enterprises, particularly those aligned with national priorities such as industrialisation, digital innovation, agribusiness, and the 24-Hour Economy. This would not be a subsidy. It would be a reclassification of social value.

Importantly, such a reform does not require new institutions, discretionary grant committees, or politically mediated funds. It can be built on existing tax administration and corporate law. Eligibility can be clearly defined. Holding periods and clawback provisions can prevent abuse. Digital records—especially through equity crowdfunding platforms—can make monitoring easier rather than harder.

Crucially, this approach does not involve upfront public expenditure. It does not require the state to pick winners or deploy scarce fiscal resources. It simply allows taxpayers to redirect a portion of their taxable income into productive risk capital rather than into consumption or passive deductions.

This is where equity crowdfunding becomes central rather than peripheral. Tax-incentivised equity investment transforms citizens from donors into owners. It democratises access to early-stage investment, spreads risk across a wider base, and creates a transparent pipeline of capital for startups that banks will never fund. When combined with strong post-investment governance, it creates an ecosystem rather than a scheme.

The alternative is familiar and deeply flawed. Venture funds staffed by former bankers become quasi-banks. Grant programmes become politicised. Assembly-level disbursements leak through patronage networks. Capital meant for innovation circulates among insiders rather than entrepreneurs. These outcomes are not accidental; they reflect incentives embedded in the system.

Tax-incentivised equity does something radical in its simplicity: it removes discretion from allocation decisions. Citizens choose which companies to back. Entrepreneurs compete for trust. Platforms provide transparency. The state sets the rules and steps back.

This approach also aligns directly with the broader argument of this series. If equity crowdfunding is to succeed, it must be supported by a coherent trust architecture and an adaptive legal framework. Tax policy is part of that framework. It signals seriousness. It anchors participation. It turns experimentation into commitment.

The question, therefore, is not whether Ghana can afford such a reform. The real question is whether Ghana can afford to continue pretending that innovation can be funded through charity, coercion, or credit alone.

A one-notch shift—from tax relief for donations to tax relief for early-stage investment—would represent one of the most consequential pro-enterprise reforms of the past two decades. It would say, clearly and credibly, that Ghana is prepared not just to celebrate entrepreneurship in speeches, but to back it structurally.

That conversation is overdue.

Next: What a Ghanaian EIS/SEIS Framework Could Look Like in Practice — Design, Safeguards, and Oversight.

>>>the writer is a PhD graduate in Business and Management from the University of Bradford, specialising in blockchains and decentralized finance. He also holds an MBA in International Marketing from the International University of Monaco. Dr. Crabbe was the first president of the Ghana Business Outsourcing Association and pioneered Africa’s first large-scale data-entry operation as well as Ghana’s first medical transcription company. He can be reached via [email protected]

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