- Reactions have yet again trailed the effort of the Ghanaian tax administration as it tries to increase revenue generated from tax
It’s reactions upon reactions as Ghana Imposes tax on PBT in 2023. PBT representing Profit-Before-Tax, PBT with the new tax in consideration on Ghana’s financial institutions is expected to increase taxpayers’ burden. This tax is to a tune of 5%.
The Vice President of IMANI Africa, Bright Simons recently condemned the newly introduced 5% tax PBT that banks and non-bank financial institutions, insurance companies, telecommunication firms, Oil Marketing Companies, Bulk Oil Distribution Companies (BDCs), and others are expected to pay in 2023.
He explained that the directive is unfair as the firms are still recovering from the effect of the Domestic Debt Exchange Programme (DDEP).
The affected firms were previously forced to assume twice their share of the burden of Ghana’s ongoing debt restructuring, and they are still feeling the impact.
Simmons continued that instead of designing policies that would continually take from the private sector, the government should focus more on encouraging private firms to reinvest the profit they make in their businesses for expansion.
Reactions as Ghana Imposes 5% on PBT in 2023: More on DDEP
The Ghanaian government has extended the set date of the settlement of the Domestic Debt Exchange Programme (DDEP) from February 14, 2023, to February 21, 2023.
According to a statement from the Ministry of Finance on February 14, 2023, even though the government is impressed that roughly 85% of bondholders partook in the program, which has amounted to ¢82,994,510,128 (¢82.99 billion), there is a need to extend the date.
The reason for this is to provide enough time to settle the New Bonds efficiently.
What is the DDEP?
To fully comprehend the concept of the DDEP, we need to first understand what a Bond is. Basically, a Bond is formed when the government of a country promises to pay interest on a loan that it gets from a citizen after an agreed period. This is usually done through other financial institutions.
Now, the Domestic Debt Exchange Programme (DDEP) is an initiative that the government wants to use to revise the terms of the deal that was previously made regarding the Bonds.
The government is changing the interest rate and also the duration that it promised to pay back the bondholder their interest and principal.
Significance
Firstly, it will increase the tax burden on banks and reduce their profitability. Banks will have to factor in this additional tax when planning their financial activities, which could impact their lending and investment decisions.
Additionally, banks may be forced to increase interest rates to offset the cost of the tax, which could negatively affect borrowers, particularly small and medium-sized businesses.
On the other hand, this tax could have positive effects on Ghana’s economy as a whole. The increased revenue generated from the tax could be used to finance infrastructure projects, improve public services, and support social welfare programs.
This could create more job opportunities, increase productivity and ultimately lead to economic growth.
Furthermore, the imposition of this tax could also promote accountability and transparency in the financial sector. Banks may be compelled to be more transparent in their financial reporting and ensure that they pay their taxes on time.
This could enhance the credibility of the financial sector in Ghana, attract more foreign investment, and contribute to the development of a more robust and stable financial system.
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