General News of 2014-06-10

New VAT charges will deter SMEs from banking – Economist

An Economist at the University of Ghana, Dr. Ebo Turkson says the implementation of the 17.5 percent Value Added Tax (VAT) charge on financial services will deter Small and Medium Enterprises (SMEs), as well as micro financial institutions from banking.

“Some of these enterprises are very small, they are mirco enterprises who do not bank a lot and therefore the small amount of money that are taken out of their account because the banks are charging them and pushing forward the VAT charges that government has imposed will deter some of them from banking,” Dr. Turkson explained.

The Ghana Revenue Authority (GRA) recently released a list of what they describe as non-core banking services that would now attract the 17.5 VAT charge

The list released affects nearly all services banks offer.

Speaking on the Citi Breakfast Show, Dr. Turkson said it is inappropriate for government to label all banking services and ask bank customers to pay VAT on them.

“If there are special services that the banks are rendering hence the government wants them to pay taxes, government should concentrate on those ones and not label all banking services and ask bank customers to pay VAT on them,” Mr. Turkson insisted.

Speaking on some challenges facing SMEs in the country, Dr. Turkson said the lack of access to credit is a major problem for SMEs.

According to him, challenges facing the SMEs have been aggravated by government’s decision to scrap them out of the credit market.

Citing other challenges, Dr. Turkson said most of the SMEs in the country do not have access to financing from banks because they lack the necessary requirements the respective banks demand.

“Some of the SME’s are not registered, they don’t keep records of accounts, they don’t have business addresses and these are the things that the banks will require if you need finance from them,” Dr. Turkson explained.

Asked why the micro finance institutions are not able to bridge the gap between the SMEs, Dr. Turkson said “these micro finance institutions intend to lend to the SMEs at very low rates but they cannot find the finance they need to propel them [SMEs] to those levels.” In places such as Kenya, technology gives an opportunity for people to bank even if there is no access to a traditional bank. Asked why technology and mobile banking is not bridging the gap in Ghana, Mr. Turkson said “to attract some of these interventions in this country, you need to create a very business friendly environment for those who have such resources to come and help but unfortunately, our business environment is not friendly.”

Source: citifmonline.com
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