Banks appeal for reduction in 1.75% E-Levy rate
Commercial banks in the country are appealing for a reduction in the charge rate for the electronic transaction levy [E-Levy].
According to the various banks, government should not charge more than 1% on electronic transactions.
Making the assertion in an interview, Chief Executive Officer the Ghana Association of Bankers [GAB], John Awuah, noted that the current 1.75% charge rate may decrease the growth of the banking sector and financial inclusion.
“As an Association, we think that the 1.75 is too high, and the rate should be reduced because we believe that anything around 1 per cent could be good at the entry point,” he said.
Mr Awuah also added that there is an opportunity to even review the rate in the Mid-Year Review of Estimates in July 2022 depending on how things go in terms of the levy, adding that they don’t think it should be pegged at 1.75%.
Finance Minister, Ken Ofori-Atta, is currently embarking on stakeholder consultations before the Bill is presented to Parliament for approval.
However, the proposed E-Levy rate still stands at 1.75%.
The E-Levy has been a bone of contention since government presented its 2022 Budget Statement to the House last year.
The Finance Minister has indicated that the levy will help increase the country’s tax-to-GDP ratio from 13% to a targeted 16% or more.
But the Minority has also insisted that the tax is a tool to exacerbate the plight of the ordinary Ghanaian, whom the Covid-19 pandemic has already impacted.
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Meanwhile, Mr Awuah noted that growth in loan impairment as a result of the Covid-19 pandemic has become a challenge to the banking industry.
According to him, a recent growth in loan impairment from 15.3% to 16.4% presents a significant risk to the banking sector.
He explained that with several bank-supported industries barely recovering from the pandemic, it means, “the cash flow projections have not been at the levels we anticipated when assets were restructured.”
“It means while banks are posting some good profit, you’ll see that the impairment number in 2021 were not that impressive. Yes, in quarter 3 it came down to around 15.3% thereabout, but we’re talking about last year or 2020 when we were talking about 16.4% or something in that region.
“So any growth in impairment is a challenge to the industry and it means that the risk to the banking sector in terms of asset quality is real,” he said.
He further explained that with an increase in impairment numbers to 16.4%, in real terms “It means for every 100 Ghana cedis that the bank gives out as loan, there is that possibility or probability that they will not be able to recover about 17 ghana cedis of it which is significant.
“When you give your deposit to the bank, you want your deposit plus whatever interest that could have accrued, so if banks are going to lend your deposit and have that likelihood of their inability to recover 16 and half percent of a 100 ghana cedis, it is significant and that is why the impairment risk is high,” he stated.
