The Securities and Exchanges Commission (SEC) says government’s decision to charge one percent tax on interests earned on investments following the implementation of the New Income Tax Law may affect domestic borrowing in the country.
The Commission which is unhappy about the development described the move as shooting down efforts aimed at increasing the banking population in the country.
The Head of Audit and Risk Management at the Securities and Exchanges Commission, Emmanuel Mensah lamented: “This will really draw back the fight that we have had to get more and more people into the financial system. The more we get people to invest in products like the mutual funds, the more we get people from the informal to the formal sector; I think that this tax imposition should be looked at again.”
The development is likely to impact on government’s external debts as it will be compelled to borrow more from the external market, he maintained.
“Sometimes the government thinks when it needs money it can go to the external market to borrow and therefore what happens to the local market if this is not done. But it is, because eventually you did not build your local base for it to be strong… we strongly expect that the financial sector grows and become very strong”, Mensah stated.
Aspects of the New Income Tax Law require investors to withhold one percent of all interests earned on their investments.