Government, through the imposition of the 5 percent financial sector levy on gross profits of banks, is expected to immediately raise some Ghs 219 million and a total of Ghs 1.7 billion from 2022 to 2024.
Banks’ profit-before-tax increased to Ghs 1.1 billion over the first two months of 2021 compared to Ghs 1.0 billion the same period last year.
According to Price Waterhouse Coopers (PwC), the 5 percent financial sector levy (finsec levy) which is expected to operate like the National Fiscal Stabilisation Levy (NFSL), will increase the tax burden on banks in which case the average effective income tax rate of banks will be 35 percent on their profits.
The introduction of the new levy, analysts argue can have dire consequences on both banks and Ghanaians as it could increase the cost of credit from banks in the form of increased fees and charges since banks might want to partially or wholly pass the new tax charge to their clients.
Aside that, the new tax will definitely reduce the profit margin of banks in the country.
However, PwC in its 2021 Budget Highlights report, also argues that provided government properly engages with the industry on the new levy, there will be no increase in bank fees and charges.
Aside from the finsec levy anticipated to earn government Ghs 1.7 billion end-2024, the COVID-19 Health Levy of 1 percentage point increase in the National Health Insurance Levy (NHIL) and 1 percentage point increase in the VAT Flat Rate is also anticipated to earn government tax revenues of Ghs 889 million in 2021 and Ghs 4.35 billion from 2022 to 2024.
The finsec levy, according to Caretaker Finance Minister, Osei Kyei Mensa-Bonsu, is to help defray outstanding commitments – locked up funds – in the financial sector.
According to government, aside restoring confidence in the financial sector and protecting savings of Ghanaians running into millions of cedis, it has spent in excess of Ghs 21 billion in refunds of monies to customers of the collapsed banks, FMCs and other financial institutions.
Presenting the 2021 budget, Mr Kyei Mensa-Bonsu opined that government will no longer be in the position to defray the remaining costs in the sector as the government intends to employ strict expenditure measures this year.
