Business News of 2014-04-25

Comment: Misconception of VAT on banking services unnecessary

Information, Communication and Education (IE&C) are key in the implementation of major campaigns that affect the well-being of the people.

The need for them is more critical when we are dealing with tax, because the Scriptures tell us how tax collectors were hated and spoken of in very opprobrious terms in Biblical times.

We do not need to go far to appreciate the people’s poor response to the payment of taxes. Even the payment of basic levy, or what used to be known as land poll, was resisted by the people and on most occasions in the past, district assemblies had to mobilise their task forces to get a few people to comply.

We recall the brouhaha that greeted the introduction of the Value Added Tax (VAT) in the 1990s, resulting in violent protests in Accra and other parts of the country.

At that time, there was general apprehension over the VAT due largely to the fact that there was not enough public education on that major paradigm shift in tax administration in the country.

But when the government withdrew the tax, repackaged it, initiated a major public education and re-introduced it, the people accepted it, albeit with some disquiet. Unfortunately, we are back to the same scenario with the imposition of VAT on certain banking services.

It all started during the Easter break when a bank sent text messages to its customers alerting them to the fact that from next month, VAT would be paid on certain services rendered for fees. The banking public became agitated, as the text messages were misconstrued to mean that all deposits and withdrawals were to attract VAT.

And since then the government has come to offer some explanation to set minds at ease, but some of the explanations contradict the new VAT Act, Act 870. A Deputy Minister of Finance, Mr Cassiel Ato Forson, told the media on Tuesday that salaries, savings, deposits, loans and payment of cheques were exempted from VAT.

He explained that the “levy only relates to the services that were initially not a core function of the banks”.

The confusion arises from the fact that the banks currently charge fees and commission for certain services rendered because, under the heading “Scope and Coverage of the Value Added Tax”, the law extends the coverage of VAT to include “the supply of financial services that are rendered for a fee, commission or a similar charge”.

It is good that the government has postponed the implementation of the VAT levy on some financial services provided by commercial banks from May to June this year. We believe the one-month postponement provides the government ample opportunity to educate the public on the new tax.

The Daily Graphic appeals to the government to use this window to engage all stakeholders, including the banks and the public, to obtain the people’s buy-in into this major government revenue mobilisation move to raise money to fix our infrastructural deficit.

Source: graphic.com
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