The Finance Minister-designate, Mr. Ken Ofori-Atta has revealed that the financial sector clean-up levy of 5% on banks will not take immediate effect once parliament gives approval.
He made this assertion before the vetting panel of Parliament’s Appointment Committee yesterday, March 25, 2021. This was in response to a question asked by the Member of Parliament for Madina, Hon. Francis Xavier-Sosu, after he cited the Vaultz News interview with Mr. John Awuah, the CEO of Ghana Association of Bankers
Question and response
“It’s reported that Mr. John Awuah, who is the Chief Executive Officer for the Ghana Association of Bankers has said that, elsewhere when such taxes are imposed there is always time given… Some breathing space given to businesses before we actually start implementing the collection of these taxes.
“What would be your response to that, given the fact that the same reasons why we are introducing these taxes, also apply to these businesses? Their cost of operation has gone high. They are all victims of the COVID situation.
“So, how would you respond to that, and how would you take their concerns into consideration. In dealing with the tax issue with businesses?”
Mr Ken Ofori-Atta then indicated that the banking sector is not the only sector charged the stability element or tax (i.e. for the financial sector clean-up). But also on other sectors of the economy.
“…Usually when parliament gives us the go-ahead for these, it doesn’t take immediate actions. So, I’m not sure he said it is something new. And you also realize that we added that tax, that stability element for tourism, hotels, etc…”
“So truly, I am not sure any citizen really has a lot more empathy than we have; when we sit down and draw up the way forward for the nation. And therefore, are very aware of the difficulties in industries, individuals… before we put these together.”
Examining the Minister-designate’s statement
While the explanation by the Minister-designate is that the levy will not take effect immediately. It would at least allow banks some breathing space. Meanwhile, whether this may follow through as promised is another thing all-together. Also, should that happen, would it be applied in the next couple of years?
For instance, the National Fiscal Stabilization Levy (NFSL) charged on the profit-before-tax of specific companies and institutions. The levy was then passed by parliament in 2013 and due for collection on the 30th September and 31st December of the same year and onward, per the NFSL Act 2013, clause 7.
On the other hand, the supposition that the stability element has also been passed on to other sectors of the economy is not indicated in the 2021 budget.
Rather, the budget mentions the provision of tax rebates of 30 percent on the income tax due for the hotel industry, restaurants, education, arts and entertainment, and travel and tours for the rest of the quarters of 2021.
Regarding the Vaultz News interview with Mr. John Awuah, he indicated that the clean-up levy should be broad-based, where other sectors of the economy are roped in to contribute to the pie. He further stated that such a move would increase revenue generation and reduce the burden on the industry.
Nonetheless, the Finance Minister-designate’s response contrasts this call by the Ghana Association of Bankers for a broad-based approach to the payment of the levy. In that, while the Minister-designate assumes that is the case, evidence suggests otherwise.