The Chief Executive Officer of the Ghana Association of Bankers (GAB), Mr. John Awuah has intimated that should policymakers fail to consider an adjustment of the said policy, the least action should be to start applying the levy in the next couple of years, say 2023.
“Elsewhere, when a tax of this magnitude is going to be levied, it is not levied and then it is applicable in the year of announcement. They may say, as a result of certain [conditions] it is going to be applicable in 2023.
“Those going to be affected can then prepare for the consequences of that fiscal action. But unfortunately, here we are, we woke up one day and we have to pay 5%.”
He remarked that that is not how economic decision-makers should expect banks to carry out their decisions. This does not help in the engagement of banks with their investors and shareholders, he opined.
Speaking with the Vaultz News, he noted that the stability of the banking environment was needed for the sector to thrive. Thus, it is in the right direction that any costs incurred during the process be financed. Albeit, the imposition of the levy would have a severe negative impact on the sector, he indicated.
That said, he therefore called for a restructuring of the policy to avert such consequences. The recently proposed financial sector clean-up levy, currently awaits parliament’s approval.
Banks expect restructuring of levy
Mr. John Awuah noted that, banks are in support of the rationale behind the government’s decision for the additional tax. Nonetheless, banks do not operate in isolation, but operate with other economic actors. He indicated that the government could restructure the levy to cover other economic actors.
“…Therefore, if there is some level of levy within the environment, we were thinking that it should be broad-based. Each sector contributing a little bit to the pie, would perhaps even rake in more mobilization of revenues. [Rather] than targeting one industry and imposing the entire levy on that industry.
“In that regard, potentially getting less [of revenue] and also having [an] adverse impact. Because, unfortunately, we are not like other industries. Our activities or actions and inactions have direct economic consequences. If banks put a stop to lending, the wheels of the economy will come to a halt. So, if you are targeting banks, then you must have all this into account.”
Other Consequences of the levy
He further indicated that, alongside these circumstances are the operations within the African Continental Free Trade Area (AfCFTA). This is an era where banks are competing with other banks on the African continent.
This means that the cost of doing business and cost of lending in the country need to be considered. He argued that, obviously, the levy in its current form does not help reduce these negative consequences.
Furthermore, he noted that this levy has come at a time where banks have already completed their budgeting processes for the year and have made certain promises to investors.
“So, if all of a sudden, you have invested knowing that this is your planned returns on your investment. And then all of a sudden, something is just thrown into the work and then your returns are short by 5%.
“…That means banks in Ghana will become unattractive as investment destinations and that is another, perhaps, unintended consequence of that action.”
Above all, in as much as banks were not consulted before the proposed levy was announced, the government should be flexible in its decision and allow some adjustments, going forward. In order that it may turn out a win-win situation for both parties.
