Business News of Wednesday, 26 September 2018
A financial expert and lecturer at the University of Birmingham, Dr Sajid M. Chaudhry has charged government to tax banks in the country since they make enormous profits at the expense of the public.
Speaking at a roundtable discussion on the theme “The contribution of banks in the changing tax environment”, the lecturer said keeping in view the level of profits banks make in the country, Bank of Ghana must introduce a tax rate of 1% total liabilities net of equity and insured deposits or rather tax 5% profits of banks.
This is because he believes banks in the country earn much higher profits compared to other industries.
According to him, bank tax will provide Ghana a sustained source of revenue which will make government achieve its Ghana Beyond Aid agenda since it will help reduce budget deficit and also act as a catalyst for banks to reduce reliance on short-term funding source and help reduce bank risk.
“Banks should contribute; they are earning too much profits. There’re different modules you can adopt, one of the ways is basically put 1% tax on the total liabilities net of insured deposits and equity or you can tax directly the profits of the banks if they still don’t reduce the lending rates and increase the deposits rate,” he said.
He further explained that “banks are not meant to earn profits at the expense of the public. This is what it means that you’re taking cheap money from the public, small depositors and then you basically earn huge amounts of interest on lending so because of the nature of this industry there should be fair contribution by this industry compared to all others”.
Speaking on the taxing profits of banks in Ghana, Dr. Chaudhry said the profit of the top six banks) in the country (GCB, Ecobank, Barclays, Fidelity, Stanbic and Standard Chartered) totalled GHC4.9 billion, equivalent to 2.38% of the national economic output, measured by gross domestic product hence the need to introduce the bank tax into the system.
“The tax on liabilities will particularly be helpful when banks are bigger, riskier and earning even more profit in the future,” he added.