Allow RCBs to channel percentage of taxes to special projects

In the face of challenges emerging out of the recent increase in Corporate Income Tax for rural and community banks (RCBs), the ARB Apex Bank has asked government to consider reducing the tax while ensuring RCBs use those monies for community development.

In the face of challenges emerging out of the recent increase in Corporate Income Tax for rural and community banks (RCBs), the ARB Apex Bank has asked government to consider reducing the tax while ensuring RCBs use those monies for community development.

It noted that the current tax regime is crippling the operations of some RCBs, given the huge jump from 8 percent to 25 percent which amounts to an over-100 percent increase.

The Managing Director of the ARB Apex Bank, Mr. Kojo Mattah said: “As much as we are willing to pay taxes to support the government’s development initiatives, the ARB would like the government to reconsider the huge increase”.

According to Mr. Mattah: “Instead of paying the 25 percent Corporate Income Tax, the RCBs could be required to pay, say, 12.5 percent and use the ‘tax savings’ accruing to them on special projects relating to education, healthcare, security and other social interventions in their catchment areas”.

He indicated that the ARB Apex Bank could then be mandated to do effective monitoring and evaluation of all RCBS to ensure that the ‘tax savings’ are applied to these specific projects.

By granting this tax concession, he asserted, it will empower RCBs to concentrate more on their community financial inclusion and development mandate.

But, “Treating them like any other profit-making entity would make us lose the very essence of introducing rural and community banking to the country in the 1970s,” he further noted.

The ARB boss was speaking at the official opening ceremony of the Akumadan Rural Bank at Akumadan in the Offinso North district of the Ashanti Region, and also observed that RCBs have not been spared in the recent happenings within the banking industry.

However, he pointed out that the ARB Apex Bank has taken note to put in place key interventions to help address some of the common challenges: like poor risk, compliance, and internal control structures; and poor corporate governance systems among others.

He assured shareholders, depositors and the banking public that RCBs are regulated by the Bank of Ghana (BoG) and ARB Apex Bank, and in so doing directed all RCBs to appoint Risk and Compliance Officers.

“The appointment of Risk and Compliance Officer(s) gives the regulator assurance that key risk issues will be effectively identified and the necessary pre-emptive controls implemented to address them.”

He therefore urged RCBs who are yet to appoint Risk and Compliance Officers to speed up the process, since it will help banks put in pre-emptive measures to protect depositors’ funds.

The Amakonhene, Nana Baffour Adu Mensah Asare-speaking on behalf of the Asantehene Otumfuo Osei Tutu II, urged the board and management of the bank to operate in a way that will bring development to the people.

He particularly advised them to support the growth of small and medium enterprises (SMEs) and farmers while deepening the financial knowledge of its customers.

The Executive Director of Akumadan Rural Bank, Rev. Isaac Baidoo – in an interview with the B&FT at the backdrop of the official opening ceremony of the bank – observed that the actions of BoG regarding the reported liquidity challenges of some banks are apt and will help sanitise the system.

However, he said he would have preferred that minimum capital requirement of banks be reconsidered; and suggested that banks that are not able to meet certain capital requirements be categorised and given a specified threshold to operate in.

He was hopeful that Akumadan Rural Bank will capitalise on financial literacy as a key strength to enlighten customers on banking products and services, which will be a value addition to their usual banking services.