"5% financial sector clean-up levy counterproductive, GAB says"

" \n The Ghana Association of Bankers (GAB) has said government's 5 per cent levy imposition on banks' gross profit is counterproductive. \n \n\n \n According to the association, the new tax will affect the ability of banks to attract the needed capital in the post-Covid-19 recovery process of the economy. \n \n\n \n Government in the 2021 Budget Statement introduced a 5 per cent tax on the gross profit of banks (5 per cent on profit-before-tax). \n \n\n \n Presenting the budget, Caretaker Finance Minister, Osei Kyei Mensa-Bonsu, averred the new tax is to help defray outstanding commitments in the financial sector. \n \n\n \n The 'outstanding commitments' government refers to is the resultant locked-up funds of depositors due to the financial sector clean-up exercise undertaken by government in August 2017. \n \n\n \n The clean-up exercise led to the collapse of 9 universal banks, 347 microfinance companies, 39 microcredit companies or money lenders, 15 savings and loans companies, eight finance house companies, two non-bank financial institutions and the revocation of the licences of 53 Fund Management Companies (FMCs). \n \n\n \n In protecting savings of Ghanaians running into millions of cedis, government said it has spent in excess of Ghs 21 billion in refunds of monies to customers of the collapsed banks, FMCs and other financial institutions. \n \n\n \n Adding it will no longer be in the position to defray the remaining costs in the sector as it intends to employ strict expenditure measures this year, hence the introduction of the 5 per cent financial sector clean-up levy. \n \n\n \n But the introduction of the new levy can have dire consequences on both banks and Ghanaians as it could increase the cost of credit from banks since banks might want to partially or wholly pass the new tax charge to their clients. \n \n\n \n Aside that, the new tax will definitely reduce the profit margin of banks in the country. \n \n\n \n The new levy, according to Mr Kyei Mensa-Bonsu will however be reviewed in 2024. \n "

"5% financial sector clean-up levy counterproductive, GAB says"

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