Rural banks cry out to government to reduce 25% income tax
The Association of Rural Banks (ARB) has reiterated its call on the government to reduce the 25 per cent Corporate Income Tax imposed on Rural and Community Banks (RCBs) in the country to enable the banks to expand their operations.
The corporate income tax went up from eight to 25 per cent in 2016 as contained in the fiscal policy of the government at the time, and the ARB says the increment has slowed down its members’ investment in Corporate Social Responsibility (CSR) programmes.
Advertisement
Also, their investment in the improvement of their systems and processes, as well as branch network expansion have drastically slowed down.
The association made these assertions at the launch of the 7th Rural Banking Week celebration in Accra on Tuesday.
The President of the association, Mr Daniel Kwame Owusu, indicated that a downward review of the tax would allow for the banks to increase their financial services to the unbanked and the underserved parts of the country, and help speed up the government’s inclusion agenda.
He said already, the National Council of the association had made several appeals to the authorities but had not been successful at getting a concession for a review of the increment.
Week-long celebrations
Takoradi will host the celebrations which will climax on November 16, with activities such as a float, exhibitions, cultural display as well as speeches by high profile persons at a durbar at the auditorium of the Takoradi Technical University.
Before the national durbar, the regional associations will also hold activities to engage their clients and the general public in a bid to build relationships and create more awareness.
Community development
Mr Owusu explained that their establishment was different from other banks in the system, indicating that they were community-based and they spent so much money to operate at their catchment areas, where the other banks do not want to venture into.
“We are key partners in national development and the huge tax increment is suffocating most of the rural and community banks and, therefore, preventing us from serving the very purposes for which we were established, that is, contributing to socio-economic development, especially in the rural areas,” Mr Owusu said.
Policy interventions
He appealed to the government and the Bank of Ghana (BoG) to endeavour to bring on board the association in deliberations on regulatory and policy interventions which directly affected the rural banking sector, adding that: “It is crucial to engage and involve us because the lack of consultations, we believe, create policy implementation challenges.”
Mr Owusu also commended the BoG for the bold step it took to sanitise the financial system, indicating that, that had helped bring back the needed investor confidence.
Minimum requirement
The Deputy Managing Director of ARB APEX Bank, Mr Alex Kwasi Awuah, who also spoke at the launch, stressed the need for the tax to be reduced to enable the RCBs to meet the GH¢1million minimum capital requirement.
He indicated that so far, 26 out of the144 RCBs had still not been able to meet the requirements due to the 25 per cent tax increment.
Mr Awuah explained that most of the RCBs usually ploughed back and converted part of their surplus which they transferred to startup capital. He therefore indicated that in the current situation where the tax rate was so high, little was left to enable the banks to meet such requirement.