Republic Bank Ghana Ltd. is urging the government to cut tax rates to cushion the economy from the fallout of the coronavirus.
The government should consider easing corporate-income tax to 20% from 25% and give workers relief, Benjamin Dzoboku, the Accra-based lender’s general manager for finance and strategy, said by phone. Banks, insurers, telecommunications firms, breweries and miners pay an additional 5% levy on pretax profit, making their effective rate 30%.
“If you don’t do that, businesses are going to suffer, every sector is affected by this Covid-19,” he said.
Ghana’s government has cut its forecasts for economic growth this year to a 37-year low of 1.5% with a partial lockdown underway. It is also trying to help small businesses, while seeking to boost maximum borrowing levels and secure extra funds from the International Monetary Fund. The central bank has cut interest rates to an eight-year low and eased capital rules to free up money for lending and to increase liquidity.
Alongside relief for workers, Kenya last month reduced its corporate income tax rate to 25% from 30%, the first country to take the step to support businesses in response to the coronavirus in sub-Saharan Africa. Other measures in the region include input-tax cuts, extension of filing dates or suspension of penalties on late filings.
Other views from Dzoboku:
- Manufacturing, agriculture, hospitality and airline industries to suffer most.
- Sees higher risk of loan defaults, rise in non-performing loans.
- Customers’ increased use of digital channels is helping avoid liquidity problems.
- Republic Bank giving clients six months suspension on loan repayments.
Victor Yaw Asante, managing director of FBN Bank Ghana Ltd.:
- Profitability to decline this year as banks become more cautious on providing loans.
- An industrywide waiver of charges on digital channels is reducing fee income, while lower interest rates will also weigh on revenue.
(Updates with background on other tax measures in Africa in fifth paragraph.)
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Vernon Wessels, Chris Kay
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