International banking and finance expert, Dr. Sajid Mukhtar Chaudhry, has suggested to the government to consider introducing treasure security tax on big banks in the country that return excess profits as one of the ways of making up for the shortfalls in its revenue generation.
He explained that tax on treasury securities will generate revenue for the government.
Currently, the payment of interest to individuals on bonds issued by the government, including interest on treasury bills, is tax exempt.
“A bank tax will provide Ghana a sustained source of revenue with attempts to move the country’s economy beyond dependence on aid and will further help reduce budget deficit,” he said.
Dr. Mukhtar Chaudhry, made the proposal at a roundtable discussion organized by the Institute of Economic Affairs (IEA) in Accra.
The event was themed, “Profit and Risk of Banks in Ghana: A case for permanent Taxation, to discuss the need for permanent Taxation on Banks.
He cited that tax on total liabilities net of equity and insured deposit will act as a catalyst for banks to reduce reliance on short term finding source and help reduce risk in long term.
“The tax on liability will particularly be helpful when banks are bigger, riskier and earning even more profit in the future,” he explained.
He therefore suggested that, “I propose that, tax on total liabilities net of equity and insured deposits for big banks with a balance sheet size of GH¢ 7,000 million to start with, which could be 2% of total liabilities net of equity and insured deposits or (long term).”
“A 10% tax on profit before tax of big 10 banks, which will yield approximately GH¢ 528 million and a 10% (half of the current bills rate tax on treasury securities will yield GH¢ 5,034 million (short term),”he explained.
He made this proposal in consideration of the huge profit the banks accrue from treasury securities.
He therefore urged the government to discourage banks from investing treasure securities buy putting some taxes on them and encourage banks to work on their own and quit some revenue and share with the government.
Vice Chairperson, Finance Committee of Parliament, Patrick Boamah, who chaired the programme urged the government to implement consumer regulations to protect the consumer.
“The banks are finding ways to survive, in the middle of this survival issue is the consumer, so it has come to a point that we ought to find middle grounds for the consumer who stands at risk,” he stated.