Bankers’ stoical about new levy

Banks are stoical about attempts by Government to reintroduce the fiscal stabilisation levy to plug the shortfall in budget revenues.

Legislation to bring back the levy, first introduced in the second half of 2009, will be put before Parliament soon, Minister of Finance and Economic Planning Seth Terkper disclosed two weeks ago.

In its previous incarnation -- from 2009 to its repeal in February 2012 -- the levy was charged as a 5 percent additional profit tax on selected industries including mining, communication and financial services (banks, rural banks, insurance companies). It is not clear at what rate the levy will be imposed this time, but it is likely the same industries will be targetted as before.

Daniel Ato Kwamena Mensah, Executive Director of the Ghana Association of Bankers, told the B&FT in an interview that banks “will go along with the levy” if it is enacted by Parliament.

“It is not a question of whether we are okay with the reintroduction or not; but if Government’s decision to reintroduce the levy is passed by Parliament, then we have no option than to go with it,” he said. “Banks already make provisions for such taxes,” he added.

He however indicated that depending on the rate that will be proposed by Government, the Association may lobby for a reduction.

Government’s tax receipts fell short of target by some 14 percent between January-April as a result of lower company profits and import duties, the Bank of Ghana (BoG) said in May. This weakness in revenues is seen as hindering Government’s ability to narrow the fiscal deficit from 12 percent of GDP in 2012 to a projected 9 percent in 2013.

In the same four-month period, the budget deficit was GH¢3.4billion, or 3.8 percent of GDP -- against a target of GH¢2.7billion or 3 percent of GDP.

Alhassan Andani, Managing Director of Stanbic Bank, said the levy, though acerbic, is necessary for stabilisation of the fiscal environment.

“It will be painful for businesses, but we have to make sure that the ship is stable for all of us to continue to plough through. And if it means taking the extra burden, like a stabilisation levy or any levy which is a burden on business, we will do our bit so that Government revenue improves.”

The Centre for Freedom and Accuracy (CFA), a policy advocacy group, last week cautioned Parliament against enacting into law the stabilisation levy and other taxes proposed by Government.

“We want to draw Parliament’s attention to the already high cost of doing business and the declining competitiveness of Ghana in the sub-region, as contained in the “Doing Business” index. We [also] want to draw Parliament’s attention to the increasing cost of funds from the commercial banks to businesses, as was admitted by the Governor of the Bank of Ghana himself,” said Executive Director of the group, Andrew Awuni.

When it was last enacted, the stabilisation levy was intended to last for 18 months, but Government extended the duration for an additional year in 2011.