The Bank South Pacific Financial Group Limited (BSP) has declared a substantially lower net profit of K69 million (US$19 million) from K259 million (US$73 million) due to a controversial levy imposed by the Government.
It will pay K190 million (US$53 million) from the K259 million (US$73 million) to the Government as additional company tax.
Group chief executive officer Robin Fleming said the profit had been reduced to K69 million because of the Government’s additional company tax.
The additional company tax approved last November, added to BSP’s existing corporate tax, represent an effective tax rate of 45% levied on the bank.
Fleming said it was “by far the highest tax rate in the region and one of the highest global rates”.
“The Government has singled out BSP while other commercial banks do not contribute to this revenue-raising measure,” he said.
The K190 million (US$53 million) tax deduction overshadowed an otherwise good performance by the bank – a K259 million US$73 million) profit compared to K203 million in the first quarter last year – resulting from a growth in income and lower loan impairment expenses.
“Income growth and lower loan impairment expense, resulted in an increase in group net profit after tax to K259 million (US$73 million),” he said.
“In accordance with accounting standards, BSP recognised the full K190 million (deduction) in first quarter of 2022, reducing the group’s net profit to K69 million despite our strong underlying performance,” Fleming said.
“It has to be taken up in full in January of each year and is not (paid out) until September, an expense against BSP.”
The only other company imposed additional tax is Digicel.
Fleming said the implications of the additional tax included:
*The creation of an unstable and inequitable tax regime in the country which would discourage long-term investment in the country; and,
*The establishment of a precedent whereby any business that outperformed its peers would be subjected to arbitrary taxes.
The superfunds representing workers in the public and private sectors and are BSP’s shareholders, estimate that the tax’s impact on them is around K1 billion (US$284 million).
Nambawan Super Ltd chief investment officer David Kitchnoge said: “Congratulations (BSP) for the performance in first quarter.
“Obviously we are very disappointed with the additional company tax that has reduced profit to K69 million.
