Ghana: GSE pursues tax incentives to enhance investor engagement

The Managing Director of the Ghana Stock Exchange (GSE), Abena Amoah, has advocated for the restoration of the capital gains tax exemption on listed securities. She is confident that reinstating this exemption would bolster investor engagement and fortify the exchange’s progress.

Amoah asserts that reintroducing the tax exemption, along with offering tax incentives to listed companies, would notably augment the market’s appeal to both local and international investors.

“We are looking at what would encourage more people to invest in our market. We used to have a waiver on capital gain tax for securities that are listed on the stock exchange. The government had indicated that it intended to renew the waiver but it has not been implemented yet.

“We think that there are too few of us investing and we believe that a tax incentive is needed to make sure that we keep saving and investing in companies on our market… we also think that certain tax concessions would encourage many more companies to come to the market,” she said during a breakfast meeting with the media.

According to the Managing Director of the GSE, the implementation of tax initiatives could lead to increased visibility for companies and potentially boost revenue generation for the state. Additionally, requiring companies to publish periodic financial statements could further contribute to this enhancement.

The exemption on capital gains, introduced in 2016 to stimulate market activity, allowed resident investors to choose a 15 percent tax rate on capital gains from investment assets. However, it expired in 2021 and has yet to be reinstated. This lack of continuity has led to uncertainty and negatively impacted investor sentiment, contributing to the market’s sluggish performance in 2022.

Governor of the Bank of Ghana, Dr. Ernest Addison, at the time, cited it as a reason for the Composite Index (GSE-CI) recording a loss of 1.79 percent on a year-to-March 22, 2022 basis, compared to the same period of 2021, when the index returned 14.06 percent.

“The year-to-date loss has been driven by a variety of factors – including the re-imposition of capital gains tax on securities listed on the GSE, which is inducing some investors to switch to government securities,” the governor said at the end of a Monetary Policy Committee (MPC) press briefing at the time.

This came after the former Finance Minister, Ken Ofori-Atta, in the 2021 budget, highlighted the exemption’s positive impact. “The reinstatement of tax exemptions for capital gains for listed companies in 2016 encouraged investors,” he said.