The Ghana Stock Exchange (GSE) and the Securities and Exchange Commission (SEC) are calling for a review of the tax regime governing interest and dividend income in order to create a level playing field for financial investors.
Harmonising the tax policy and rates that govern income earned from equities and government bonds and Treasuries will equalise the current system whereby interest income is tax-exempt but dividend income is subjected to 8 percent tax, the two bodies said.
“Once you are not taxing interest income and you are taxing dividend income, you are disadvantaging those who go for shares,” Mr. Ekow Afedzie, Deputy Managing Director of the Ghana Stock Exchange (GSE), told the B&FT in an interview.
He said a review of the tax charged on dividend income “might improve incomes being earned by those who buy shares. If people are buying shares to earn dividend income, then once you take it off they make more income. In some jurisdictions in Africa dividends are not taxed.”
Mr. Adu Anane Antwi, Director-General of the Securities and Exchange Commission (SEC), said: “We shouldn’t use tax policies to create an unlevel playing field for our investors. If an individual invests or buys Government bonds or Treasuries, the interest that is paid to that individual is not taxed; so why can’t we use the same system for individuals that invest in equities?
“Sometimes, an individual gets a dividend of GH¢1 or GH¢4 and Government still takes 8% [as tax]. We think that it does not encourage individuals to come to the market.”
Touching on the payment of a mandatory 0.05 percent Stamp Duty by companies that raise capital through share issue, or transfer capital from income surplus to stated capital, Mr. Afedzie said the duty is on the high side.
“The stamp duty makes it very expensive to do additional offers, and to move funds from surplus to stated capital. Anything that will increase your capital base is taxed. It is high and that is also a disincentive. When it is reviewed, it will make it less expensive for companies to raise funds.
“If we encourage people to shift some of their surpluses to stated capital, it is good for the company,” said Mr. Antwi, who argued that income that remains in the income surplus account is not “safe”, as shareholders can pass a resolution to distribute all the profits of an organisation.
“Let us relax that for listed companies. If Government cannot give them a whole waiver, let us reduce the stamp tax on capital substantially so that it will reduce their cost of raising capital once they are listed companies,” he added.
Source: Business & Financial Times
