Business News of 2014-07-09

AGI backs suspension of VAT on financial services

The Association of Ghana Industries (AGI) has welcomed the decision by the Ghana Revenue Authority (GRA), to suspend the introduction of the 17.5 per cent Value Added Tax (VAT) on financial services originally scheduled to take effect from July 1, 2014.
The Executive Director of the AGI, Mr Seth Twum-Akwaboah, told GRAPHIC BUSINESS on July 2, 2014, that the suspension was refreshing because the structures on the ground did not favour the implementation of such a policy.
“We welcome the suspension because we think that there are not adequate structures on the ground for implementation and also lots of consultation needs to be done to ensure that people understand it very well to pave way for adequate structures to be put in place for smooth implementation,” he said.
According to him, further consultation and discussion on the issue could determine if the implementation should continue, not even implemented at all or whether it should be refined or reformed in a way that could be attractive for business operations.
He said the AGI supported the government’s decisions when it came to mobilising funds to support development and did not resist the government efforts.
“But when it happens that the efforts would be inimical to businesses, the very businesses that need it to operate smoothly and successfully, then we have an issue. And this particular tax we felt that the form and the nature of it and structure on the ground was not adequate for its implementation that is why we called for its suspension and if government has been bold enough to do that, I think it is in order,” he added.
He called for a deeper and adequate consultation before taxes of such nature are implemented to ensure its success.
VAT on bank services
The government introduced a 17.5 per cent VAT levy on some financial services rendered by commercial banks in a bid to boost revenue and keep its fiscal stabilization plans on track.
The levy was also part of the expansion of the scope of taxes under the VAT Amendment Law which was passed in November 2013 and which raised tax rates, including the National Health Insurance Levy, from 15 per cent to 17.5 per cent.
According to the amended law, ‘financial services’ means provision of insurance; transfer, receipt of, or dealing with money, whether in domestic or foreign currency,any note or order of payment of money; provision of credit; or operation of a bank account or an account of a similar institution.
Criticisms
The government’s decision to levy taxes on some financial services rendered by commercial banks in a bid to boost revenue came under heavy criticism and placed Ghana among a list of countries in the world which charge VAT on financial services.
The President of the Institute of Chartered Accountant Ghana (ICAG), Professor Boasiako Omane Antwi, in an interview said the decision to levy VAT on some selected banking transactions was done in a rush, therefore, a postponement to enable enough publicity was good.
He said it was necessary for stakeholders to be consulted before taxes were introduced.
However, he added that tax was a civil duty that needed to be paid by all to be able to develop our nation.
“What we should be working for as a country is to make sure that people voluntarily pay tax such that paying tax becomes a joy rather than a punishment. In countries like South Africa and the United Kingdom, people queue to pay tax because they see what their tax is doing for them and again they have been conscientised to see it as a civic responsibility and these are some of the things that we need to do,” he stated.
GRA’s statement
The GRA suspended the introduction of the 17.5 per cent VAT on financial services originally scheduled to take effect from July 1, 2014.
A statement issued by the GRA said after a careful evaluation of the progress of the ongoing publicity and education programme on the VAT financial services, and taking cognisance of the request by sections of the banking community for the extension of the period of preparation for the implementation of the tax,”the commencement date of July 1, 2014 originally set has been postponed until further notice.”
It said the decision, taken in consultation with the appropriate stakeholders, was to allow for adequate time for the banks to achieve the level of preparedness that would ensure a hitch-free implementation.