Dividends should be tax-exempt – SEC

The Director-General of the Securities and Exchange Commission (SEC), Mr. Adu Anane Antwi, has called for uniformity in the tax policies that govern interest earned on investing in listed equities and government bonds and treasuries. “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?” he quizzed. “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,” he said. Anane Antwi was speaking to the B&FT on the sidelines of the launch of this year’s Capital Market Week in Accra. He proposed a ceiling to ensure that wealthy individuals do not take undue advantage of a removal of taxes on dividends. “Because we have some wealthy individuals, government can say that if an individual gets a dividend up to GH¢200 it will not be taxed. But if it is more, then it means you are a wealthy person and have to pay taxes.” Mr. Anane Antwi also explained that the risk associated with equities on the country’s capital market makes it precarious to invest pension funds in equities. “Strictly speaking, pension funds should not be invested in equities because of their risky nature; pension funds will normally invest in fixed-income securities -- where you can budget for the incomes that you are going to receive each year and therefore you know your cash flow,” he said. Mr. Antwi said the key area that pensions will have to look at is the bond market. “We must develop our corporate bond market to make sure that we have investment products for the pension funds.” Speaking at the event, the Deputy Managing Director of the Ghana Stock Exchange, Mr. Ekow Afedzie, said government should allow the Agricultural Development Bank to list on the stock exchange to raise more capital. “You know that ADB belongs to government and the Bank of Ghana; it is normally the owners who determine when to go public. The management of ADB and the board came out boldly that they wanted to go public -- not to sell the government’s shares but to raise money to expand, and that is a very laudable idea -- and we will encourage government to allow them to do that.” ADB is 52% owned by government with the remaining 48% held by the Financial Investment Trust on behalf of the Bank of Ghana. “For us at the Stock Exchange, we wish they would come this year or even tomorrow; because ADB has become a very profitable bank and is doing very well, and I believe investors will be willing to pick up shares in the bank,” he added. source:b&ft