Prior to the introduction of the new corporate tax regime, which came into effect in 2015, (Act 896), the Rural and Community Banks (RCBs), paid a flat corporate tax of 8 percent. Under the new tax regime however, companies engaged in mining or upstream oil and gas businesses, pay 35 percent corporate tax, while all other companies pay 25 percent.

According to the new corporate tax classification, the RCBs fall into the second tier of companies described above and are therefore paying the mandatory 25 percent corporate tax.  The surge in the corporate tax rate represents an unprecedented 212.5 percent for the RCBs.

The previous 8 percent corporate tax, The Rural Banker believes, was applied to the RCBs because of the development-oriented, community and rural focus of these banks. It cannot be gainsaid that the Government needs more tax resources to be able to effectively prosecute the developmental needs of the country, particularly so because of the country’s current status of a middle income country, which prevents us from accessing cheap credit and grants from development partners.

However, The Rural Banker believes that our quest to mobilise more domestic tax revenue should be carefully weighed against the crucial role the RCBs continue to play in the economic development of the country.

There are currently 141 RCBs, with more than 700 branches and 5 million customers, providing permanent jobs to more than 15,000 people across the country. This means that, put together, the ARB Apex Bank and the RCBs form the largest bank branch network in the country and command almost twice the number of customers of all the 34 universal banks put together.

The RCBs provide the needed micro-credit to individual farmers, petty traders, fishers, fish mongers, as well as small and medium enterprises (SMEs) in sometimes, hard-to-reach rural communities, which the commercial banks fear to tread.

Commercial banks also shy away from the rural dwellers because, many of the rural folks lack the necessary documentation and collateral required by commercial banks as security for obtaining loan facilities.

The Rural Banker is therefore humbly appealing to the Government to re-consider revising downwards, the suffocating 25 corporate tax on the RCBs.

The RCBs are specialized rural development institutions. The tax rate for RCBs could be pegged at a flat 10 percent or in the worst case scenario, fixed at 12.5 percent.

The Rural Banker respectfully submits that the 212.5 percent increase in the corporate tax of the RCBs is simply stifling their operations. The RCBs could be required to use the ‘tax savings’ accruing to them from paying a fixed corporate tax of 12.5 percent on special projects relating to say, education, healthcare, security, etc. in their catchment areas. The ARB Apex Bank, could then be mandated to do an effective monitoring and evaluation of all the RCBs to ensure that the 'tax savings' are applied to these specific projects.

The time to act is now!