An international banking and finance expert, Dr Sajid Mukhtar Chaudhry, has suggested to the government to consider imposing extra taxes on big banks in the country that return super-normal profits as one of the ways of making up for the shortfalls in government revenue.
Justifying his call, Dr Chaudhry said the big banks returned hefty profits on the back of depositors’ funds, adding that they also had the highest lending rates and net interest margins, compared with others in some countries in West Africa.
Dr Chaudhry, a lecturer at the University of Birmingham Business School in the United Kingdom, made the call in an interview with the Daily Graphic prior to a public lecture he delivered at the Institute of Economic Affairs (IEA) last Tuesday.
He said Ghana’s net interest margins, for instance, were the highest, compared to those of peers such as Nigeria, The Sudan, Cote d’Ivoire and Kenya.
“If you look at the loan-to-Gross Domestic Product (GDP) ratio of Ghana, it is about 17 per cent. The sub-Saharan average is about 32 per cent. That means that the banks are not working hard enough to reach out to industry to lend to it,” he noted.
Dr Chaudhry said with such low level lending, there would be no robust economic activity in the country.
“So we are also proposing that there could be a penalty tax imposed on them as well; those not working hard must ensure they go out and lend out as a way of increasing economic activity,” he added.
In his presentation during the lecture, Dr Chaudhry shared some research in a book he is co-editing with another professor on the GCB Bank, Ecobank, Barclays Bank, Fidelity Bank, Standard Chartered Bank and Stanbic Bank.
The total profit of the six banks in 2017 from their core business was about GH¢4,901.87 million, equivalent to 2.38 per cent of the country's Gross Domestic Product (GDP); 67 per cent of the country's tax revenue from goods and services and 227 per cent of the fuel excise tax.
Research on banks
The lecture was on the theme: “Taxing profits of banks in Ghana”.
Mr Chaudhry, who is also the co-author of the book, Taxing banks fairly, with Prof. Andy Mulineux, shared some perspectives on taxation and banking from the book.
The book proposes that regulation and taxation should be used hand in hand to make banks efficient and discourage risky behaviour, as countries, including the UK and Australia, have done.
He said stronger regulatory support was needed to get banks to conform to the tax regime and prevent them from passing on cost to clients.
The Chairman for the occasion, Mr Sam Okudzeto, a member of the Council of State, urged Ghanaians to discuss national issues dispassionately, with focus on the national interest.
The Board Chairman of the IEA, Dr Charles Mensa, said the IEA had, as far back as the 1990s, advocated the regulation of interest rates but that had not been carried out.
He noted, however, that currently there seemed to be an inclination towards that, adding that taxing the super profits of banks needed to be considered as an avenue to shore up the country’s revenue.