Association of Rural Banks (ARB) is calling on the government to cut down Corporate Income Tax paid by the Rural and Community Banks (RCBs), increased from the previous 8 percent to 25 percent.
The upward review of the Corporate Income Tax has affected RCBs in two major ways: member banks have slowed down on or reduced their investments in Corporate Social Responsibility programmes; and secondly, investments in improvement of this system and processes as well as branch network expansions have drastically slowed down, the National President of the Association of Rural Banks, ARB, Mr. Daniel Ohene Kweku Owusu, has said.
The Rural Banks were set up as catalysts for rural development through their profits, and therefore giving them low tax rates provided them opportunity to make more profits which were then channeled into Corporate Social Responsibility programmes.
“The tax issue came up when the new income tax act was promulgated in 2016 and Rural Banks were given special dispensation, whereby we had a 10-year tax holiday. Afterward, there was an 8% income tax rate. But the new law brought in 25% across the board for all corporate entities”, Mr. Owusu noted during the launch of the 7th Rural Banking Week Celebration, held under the theme ‘The Role of Rural and Community Banks in Financial Inclusion’.
He added that, the 10-year period enabled them to build up their capital, and thereafter the 8% rate gave them more profits to plough back into expansion of their activities in the area of branch expansion and modernising operations.
“But this tax hike to 25% has crippled us in terms of the resources available to undertake activities like Corporate Social Responsibilities and expansion of our programmes. So, due to the special nature of Rural Banks, they survived through mostly the Bank of Ghana’s intervention programmes and also those of government – which made resources available for the Rural Banks to modernise their operations by hooking-up to the computerization programmes. So, these funds have dried-up and it is up to the Rural Banks to generate their own resources. The banks cannot do depositors’ funds to go into these expansion projects, or injection of fresh capital. So, with this hike in corporate tax, rural banks are crippled in meeting their responsibilities in Corporate Social Responsibility and expansion programmes,” said Mr. Owusu
He therefore used the annual week celebration occasion to appeal for government to come to the aid of the RCBs. According to him, the RCBs are key partners in national development, especially in the areas of operation: “We believe that reducing the income tax on RCBs would allow them to expand their operations and help increase financial services to the unbanked and underserved parts of the country, thereby helping to speed-up government’s financial inclusion agenda”.
The Rural Banking Week was instituted 12 years ago, and is aimed at sensitising members of the public on the products and services offerings of RCBs to mainstream their crucial role in rural financial intermediation in the country.
The celebration is a bi-annual event, and the climax is scheduled to coincide with World Savings Day which falls on October 31 every year.
Mr. Owusu said this year’s celebration will be tweaked to favour local circumstance in Ghana. Every year there are original Week celebrations by the various regional chapters, whereby one region is chosen to host the climax of the National Rural Banking Week celebrations.
The host region for the climax is rotated to bring original balance, as well as offer the platform for various regions to market their businesses to people from all across the country who converge for the celebration’s climax. This year, Western Region will host the celebration’s climax.
Source: Adnan Adams Mohammed