‘Big banks must pay more taxes’

Accra- Professor SajidMukhtarChaudhry, a Senior Lecturer in Finance at the University of Birmingham, United Kingdom, has suggested that the Bank of Ghana considers charging five per cent direct tax on banks’ profits after tax.

This, he said, was in consideration of the huge profits the banks accrue on depositors’ funds.

Big banks are making a lot of profits, charging too much on borrowers, and they’re not paying enough to the depositors’ funds, therefore, the public must be compensated for that, which is not happening at the moment, Prof. Chaudhry said.

He cited the profit threshold of top six banks in the country namely; the GCB, Ecobank, Barclays, Fidelity, Standard Chartered and Stanbic banks in 2017, which recorded five billion Ghana cedis, representing 2.8 per cent of the country’s Gross Domestic Product (GDP).

Prof. Chaudhry made the call at a roundtable discussion organised by the Institute of Economic Affairs, a policy think tank, in Accra on Tuesday.

The event was on the theme: The Contribution of Banks in the Changing Tax Environment, which brought together Members of Parliament, representatives of Civil Society Organisations and the media, to discuss the banking environment and how it could support the country’s development agenda.

He said the amount represented 67 per cent of the country’s total taxes received on goods and services, with some of the banks witnessing 40 per cent returns on equity.

This clearly shows that the profit the banks are earning on the depositors’ funds are quite high and they need to pay more to the Government, he said.

Prof. Chaudhry urged the BoG to place one per cent tax on the banks’ total liabilities net of insured deposits and equity.

This, he said, would enable the country to gain about GHc160 million annually, which would help reduce the budget deficit and, thus, contribute to the overall national infrastructural development.

The six banks, he said, had 50 per cent of the banking market share, with each of the banks earning an average of 28 per cent of return on equity.

It is possible that if one starts a banking business, that person can gain his/her investment back within less than one-and-half years.

Prof. Chaudhry, who is a co-author of a book, titled: Taxing Banks Fairly, with interest in financing, taxation and regulation of banks, urged the banks to refrain from short-term borrowing, and rather pursue long-term lending to contain any shocks that might come as a result of withdrawal of the depositors’ funds.

Mr Samuel Okudzeto, a Member of the Council of State, who chaired the function, underscored the need for the nation to have common grounds on certain national issues, instead of politicising every policy decision of a ruling government.

He called for a national dialogue on some of the concerns raised by Prof. Chaudhry, which could help the nation garner alternative sources of revenue for development.

Source: Ghana News Agency