Business News of 2014-06-10

"Salaries are not exempt from VAT on financial services"

Contrary to the assurance from the Bank of Ghana (BoG) that employee salaries will not be affected by the 17.5% tax on financial services, a financial analyst says that cannot be true.
According to Sydney Casely-Hayford, the Ghana Revenue Authority (GRA) is taxing commissions which banks charge on every withdrawal a customer makes on his account which also means anyone who received a salary through the bank, will pay VAT.
The GRA clashed with banks and customers in May after it announced it will be implementing the 17.5% VAT on financial services in June. There were fears the tax will touch salaries and dampen patronage for banking services, a claim BoG denied and in a bid to calm fears, embarked on a media campaign.
They promised to release a list that will clarify confusion over which service would be exempt from the taxes. The list released last week has re-ignited public discontent.
Taxable services include current accounts (foreign/local), corporate bodies only, bank draft (payment order), stopped and returned cheques, commission on turnover (corporate bodies only), cheques for collection, telephone banking, cheque books, replacement of lost cheque book and debit cards and credit cards among several others.
"It is ridiculous", Mr. Casely- Hayford said of the list and pointed out VAT is slapped on C.O.T. According to the list, C.O.T charges are on corporate bodies. With a concentration on items such as ATM cards and other electronic services, Sydney questioned the wisdom in the policy which according to him is undoing all the work to get Ghana to operate a cashless economy.
He said government was making "stupid" and "irrational" decisions because; it is "broke and desperate". The policy effect would be that "I'm going to call my bank and say no more ATM cards. Don't alert me when money goes into my account. I'm not interested in taking money from you".
Picking on the meaning of VAT -Value Added Tax - he questioned the value in the financial services tax because it merely takes from customers without adding any valuable service. "That is a goods and services tax", he branded.
For a Central Bank whose objective is to bring stability in the banking sector, Sydney believed, this policy will do the opposite. Vice- President of IMANI Ghana, Kofi Bentil called the policy "illogical" and wondered why the BoG would invest $40 million to encourage the use of E-Zich only for the Bank to implement a policy that discourages the use of any electronic banking service.
The government of Ghana is under pressure to find money to plug a dangerous deficit currently at 8.1% of GDP. Since 2013, Government has been trying to raise all sorts of taxes to bridge the deficit. It has included tax on condoms that fetched the treasury only Ghc10,000.
Source: myjoyonline.com
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