Banks being taxed for efficiency

Banks are, to some extent, being taxed for being efficient, managing director of RBC Trinidad & Tobago, Darryl White has said.

“Banks’ profits have been increasing due to prudential operations, taking tough decisions, managing costs and running efficiently. To some extent one can argue (we) are being taxed for being efficient,” White told reporters at the Hyatt Regency, Port of Spain.

In his Budget statement on Monday, Finance Minister Colm Imbert announced a 35 percent tax on the profits of commercial banks.

White was clear to say they were not being taxed unfairly, but that the intention has always been to share in adjustments (of the economy) and this is now what is required of banks.

He did emphasise, however, that it was banks that took Trinidad and Tobago through the worldwide economic recession (which started in 2008) when many other banks around the world were collapsing, because local institutions were prudently run.

“A stable banking sector becomes the foundation of a growing economy and without a strong and substantive and contributing banking sector the steadiness that Trinidad has and the basis for growth would not be there,” he said.

White added that there are still some details to be fleshed out, but noted that since the government did own a bank (State enterprise First Citizens), it was basically a win-win situation since they would be collecting taxes, and still benefit from dividends in the event of sustained profitability.

Regular shareholders—the investing public included—would, however, lose out if there were some impact on dividends. “If we had a perfect capital market (stock exchange) you’d probably see share prices of banks being affected with this news,” White said.