A banking expert, Dr Sajid M Chaudhry of Aston University, UK, is proposing another tax for banks called ‘bank tax’, saying banks operating in Ghana are too profitable, earning much higher profits compared to other industries, with most of the profits coming from investment in treasury securities.

According to him, a bank levy is particularly important for developing countries like Ghana as it will provide a continuous stream of public revenue that can be used to achieve United Nations Sustainable Development Goals (SDGs), namely reducing poverty and hunger, providing good health and well-being and quality education, among other goals.

Speaking at an event organised by the Institute of Economic Affairs (IEA), he pointed out that the revenue can be used to fund green investments such as renewable energy projects, climate change mitigation and sustainable infrastructure.

He said a 5% tax on profit before tax of 10 big banks will yield approximately GH¢264 million revenue.

Similarly, a one percent tax on treasury securities will yield GH¢577 million in the short term.

He explained that many countries have introduced a bank tax and the last country that has introduced a bank tax (in May 2017) is Australia and the reason of this introduction given by the Treasurer is to tackle Australia’s budget deficit.

Dr. Chaudhry also proposed a tax on total liabilities net of equity and insured deposits that will act as a catalyst for banks to reduce reliance on short-term funding sources and help reduce bank risk in the long term.

“I propose a tax of 2% of total liabilities net of equity and insured deposits for the long term or 10% of profit before tax, whichever is higher. For the short term, I propose a 1.0% (the rate with change with the change in the interest rate) tax on investment in treasury securities”.

He added that the tax on liabilities will particularly be helpful when banks are bigger, riskier and earning even more profit in future.

Risk Level of Banks

The UK don said the riskiness of banks in Ghana are consistent with the theoretical prediction that banks investment in treasury securities has reduced their riskiness.

DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.

Tags:

UK banking expert says banks make too much money; proposes 'bank tax' and others

Suggested for you

More Stories

Sophia Eguono on how she almost missed her first brand deal

Southampton Relegated from Championship After Spying Admission

SWDC explains license only for existing rail tracks

Dr. Apaak starts work on 24-Hour Economy Market in Fumbisi

Builsa South Development Will Continue - Dr Apaak

GRIDCo and ECG to Conduct Maintenance in Four Regions on Wednesday, May 20

Discussion