News Column

VAT Charges Not On Deposits

April 28, 2014

Daniel Nonor

Banks contemplating imposing an additional 17.5 per cent Value Added Tax charge on all services could be taking an illegal advantage of their customers, as the new VAT Act, Act 870, only affects fees that are charged on non-core financial services, such as consulting services, data processing, legal, accounting, and other such services.

There has been a general outcry by Ghanaians who felt the new fees could affect their savings and other core transactions at the bank. But, the Ministry of Finance, in a statement clarifying issues on the charges, noted that the charges exclude bank transactions such as savings, deposits, loans, and payment with cheques. "We wish to state categorically those salaries, savings, deposits, loans and payment with cheques are all exempted from VAT.

The new VAT Act, Act 870, only affects fees that are charged on non-core financial services such as data processing, legal, accounting, actuarial, notary and consulting services", Deputy Minister of Finance, Cassiel Ato Baah Forson, noted in the statement. He further explained that Act 870 requires the banks to register for VAT, and that they can offset the VAT against the VAT they charge. Therefore, the impact of the VAT is not the full 17.5 per cent as is being speculated. VAT registered businesses/persons can also offset the VAT (input VAT) they pay to the banks against their VAT (output VAT).

Dr. Akoto Osei, a former minister of state at the Finance Ministry, told The Chronicle that the news of banks issuing notices indicating that they would begin charging the new fees on all their services, effective May 1, 2014, comes not only as a surprise, but a big disincentive for the banking populace. He noted that any such move would prevent many from banking. "You don't want to do anything that is disincentive to saving." Dr. Akoto emphasised that the directive doing the rounds from the banks are "completely unacceptable," and he believes "someone is being mischievous."

He further noted that the controversies surrounding the new VAT Act have arisen because the government failed to listen to the concerns raised by the Minority and rushed the bill to Parliament for passage. The Ministry of Finance, however, says the enforcement of the tax obligation should have started from January 2nd, 2014, but the banks were allowed till May to enable them fully prepare to implement the new policy.

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Source: AllAfrica

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