Banks rue 40% tax on profits
The Bankers Association of Malawi (BAM) has protested the introduction of 40 percent corporate tax on annual profit above K10 billion, saying they feel banks are being punished for doing something positive to the economy.
BAM’s reaction follows Minister of Finance and Economic Affairs Sosten Gwengwe budget winding up statement in Parliament in Lilongwe on Tuesday on the proposed K3.7 trillion 2023/24 National Budget.
The minister said the extra revenue from taxes imposed on banks will be used to mobilise resources for rebuilding livelihoods for survivors of Tropical Cyclone Freddy and the damaged infrastructure.
But in a written response yesterday, BAM chief executive officer Lyness Nkungula argued that not all profits that commercial bank make are consumed, adding that some are ploughed back for business growth.
“We understand what government is going through, but we believe that each business player should be accorded the same treatment during such tough times,” she said.
Nkungula said banks toil to make profits and pay heavily on investments, adding that it is a simple rule that the more they invest, the more reasonable profits the banks reap.
She said the economy needs a healthy banking sector that can help in the recovery of the country, adding that banks should not be discriminated against.
“We understand this is a temporary measure but for how long will this be? Such issues can destroy business. Let us be fair,” said Nkungula.
In Parliament, Gwengwe said if a bank makes profits of up to K10 billion, the standard corporate tax rate of 30 percent will be applicable while for all profits above K10 billion, they will be treated as excess profits and taxed at 40 percent.
“This is a temporary tax measure aimed at raising resources to assist in rebuilding of the affected areas,” he said.
In an interview yesterday, banking and finance expert Misheck Esau said while the move to target banks only with a super-profits tax at this level sends a wrong signal to the economy at large, Ministry of Finance has missed a great opportunity to enlist banks to help the country to grow the tax base.
He said that super-taxes collected in this way will just be consumed by the civil service with no broad-based benefits to the economy.
Said Esau: “Banks just happen to be the most transparent due to the compliance regime they are subjected to. So what happens to companies that are in the profitable sectors of the economy like telecoms, energy, wholesale and retail trade, construction and mining? This is clearly not a good move in tax equity.”
On Tuesday, taxation expert Misheck Msiska said elsewhere governments introduce windfall tax in sectors deemed to be making extra profits.
In the year ended December 2022, FDH Bank plc registered a profit-after-tax of K22.932 billion, Standard Bank plc reported a K39.2 billion rise in after-tax-profit while NBS Bank plc expects profit-after-tax to be approximately over 140 percent higher than the profit recorded in the comparative period.
Treasury also said it hopes to raise K30 billion through the Freddy Levy pegged at K54 per litre of fuel to be incorporated in the fuel price build up.
