Posted: Monday 28th April 2014 at 16:30 pm

Banks in Ghana are lazy – IMANI Chief


IMANI Chief, Franklin Cudjoe, has accused banks in Ghana of laziness after a wave of public anger over a controversial tax law that targets what the Finance Ministry has called “non-core” financial services in the banking sector.

“I …liken banks in this country to lactogen banks [babies],” Mr. Cudjoe said. “They sit; they hardly do things that are expected of them as real banks. And what they do, essentially, [is to] wait. It is only when it appears the public is in uproar against something the public notices may affect them that … the banks then turn to speak.”

He went on, “[The banks] should have raised flags long ago… They sat down, did nothing and all of a sudden, now that the [implementation] time is near, they are making it look as if government is short-changing us because they [the banks] will pass on [the additional cost onto customers]”.

His comments on Saturday were the first such open reprimand of banks in Ghana, ever since public outrage over the new Value Added Tax law begun.

Panic Withdrawals
Some provisions of the law, passed last December, have reportedly triggered panic withdrawal of deposits at the various banks after news reports claimed that a new 17.5 percent VAT levies on “non-core” financial services of banks could erode salaries, savings and deposits of customers.

Reports say the panic withdrawals escalated last week after a number of banks circulated bulk text messages to alert clients that the new VAT policy will take effect from May, and will affect service charges.

In a desperate bid to restore calm, the Ministry of Finance issued a statement on Tuesday, April 22, 2014 in which it said: “We wish to state categorically that salaries, savings, deposits, loans and payment with cheques are all exempted from VAT.”

It said, “The new VAT Act, Act 870 only affects fees that are charged on non-core financial services such as data processing, legal, accounting, actuarial, notary and consulting services”.

The statement also said, “Act 870 requires the Banks to register for VAT and they can offset the VAT against the VAT they charge. Therefore, the impact of the VAT is not the full 17.5 per cent as being speculated. VAT registered businesses/persons can also offset the VAT (input VAT) they pay to the banks against their VAT (output VAT).

“The general public is also informed that this enforcement of the tax obligation should have started from January 2nd 2014, but the banks were allowed till May to enable them to fully prepare to implement the new policy”.

Although the statement sought to clarify the hazy issues surrounding planned implementation of the new VAT policy, it appears to have done very little to convince critics.

AFAG Threatens Street Protests
Two days after the Ministry’s statement, pressure group, Alliance for Accountable Governance (AFAG), challenged government to withdraw the planned VAT policy or face a new wave of street protests over the law.

“AFAG will use all legitimate means to resist the implementation of this bank service tax. It is certainly not popular,” the group said in a statement. “Ghana’s economy is in a failed state. We feel very sorry for President John Mahama for supervising this mess. It is however not surprising to Ghanaians to see President Mahama, his extended family and cronies getting better off, as Ghanaians continue to wallow in abject poverty”.

Also, opposition Member of Parliament, J.B Danqua-Adu, accused the Ministry of deliberately misinterpreting the VAT law in a bid to quell public anger. He insisted that the charges in the law will hit customers of banks across the country, making them worse off.

Banks Are Lack Vision
On Saturday, Franklin Cudjoe, founding President of IMANI Ghana, a policy think tank, waded into the controversy and criticized banks in the country for not being “proactive”.

“I think this confusion is needless,” the IMANI Chief said, accusing the nation’s banks of playing a huge part in provoking the “needless” public panic over the law.

“The banks have been very passive,” he said. “We all saw it coming and the banks –– that are supposed to be custodians of our money, because without our money they are worth nothing –– sit and post all kinds of profits; sometimes these [profits] are nebulous…”

Mr. Cudjoe added: “This is an industry that is supposed to be futuristic and be vision-filled. But like most institutions in this country –– the banks especially –– are just an extension of some of our public institutions. They sit and wait, relying on low-hanging fruits. That’s how they make their money.

The IMANI boss called himself a “Capitalist” but said banks in Ghana have a rich history of “just feeding off what they have not done.”

In his view, the various banks failed to make cogent inputs into the law, leading to the confusion that has stalled its implementation.

“I think businesses in this town have got to be very proactive as well; invest in knowledge,” Mr. Cudjoe said, targeting institutions whose officials keep rushing to think thanks like IMANI to “help us” to fight policies affecting their sectors when –– from the onset –– they could have hired experts to help influence public policy. “We are not hatchet men,” he insisted. “It is co-regulation. You should be interested in it”.

The IMANI Chief made the comments on Citi FM’s news analysis programme, The Big Issue on Saturday. Listeners of the station listened to a playback of the program on Sunday.

Banks Exaggerated Impact Of Levy
Another member of the panel, Sydney Caseley-Hayford, a financial analyst, added his voice to Mr. Cudjoe’s open reprimand of banks in the country. “I think the banks have deliberately distorted and exaggerated the effect of [the law] in the public medium,” he said. “It is a very well coordinated public scare …and that has brought government to its knees”.

Taking his turn, a law lecturer at the Montcrest University, Yaw Oppong, identified what he called serious contradictions in the VAT law and called on government to urgently sponsor a bill to clarify the levies relating to financial transactions.

He said, “We have to go back [to Parliament] and then fashion out this law, in my view, in a way that will make some more sense to us”.

On Thursday, Citi FM’s Vivian Kai Mensah reported that banks around the country have agreed not to charge “VAT on salaries, savings, deposits, investments and interests or loans”.

The agreement, she said, came at an emergency meeting held between the Ministry of Finance, the Ghana Revenue Authority and the Ghana Association of Bankers on the planned implementation of VAT on financial services.

Implementation of the new VAT policy is said to have been deferred until June.

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