Implementation of VAT on banking services in June
THE government has postponed the planned implementation of the 17.5 per cent Value Added Tax (VAT) levy on some financial services by commercial banks from May to June this year.
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But even before the levy takes off, the Ghana Association of Bankers (GAB) is demanding that the government publishes the indicative list of the exempt and taxable services by commercial banks.
The one-month postponement is to allow for enough public education on the services that are exempt and those that are taxable.
Deputy Minister
A Deputy Minister of Finance, Mr Cassiel Ato Forson, in an interview, said, "We are looking at June to begin the implementation of this levy.”
He was upbeat that enough public education would have been carried out by June for the public to understand the essence, the taxable services and those that were exempted from the levy.
Some commercial banks such as Barclays and Ecobank have circulated text messages informing clients that the policy will take effect from May.
The decision to levy a 17.5 per cent levy on financial services rendered by the commercial banks has generated a huge scare among the public, with reported cases of panic withdrawal by the customers of the banks.
Services considered 'core banking services', such as the use of ATMs, remittances (mobile money transfers), salaries, savings, deposits and loans, will not attract the new VAT charges.
According to the deputy minister, the government was engaging key stakeholders as part of the awareness creation programme before the final implementation.
"What we had wanted initially was a six-month window for the technical committee to submit its report to the minister, to be followed by public education before we finalise the date of implementation.
“We never said we want to start the implementation in May,” he emphasised.
He said the implementation of the levy did not necessarily mean a 17.5 per cent increase in the cost of banking services rendered to consumers.
Bankers
But the Executive Secretary of the GAB, Mr D. K. Mensah, has demanded the indicative list contained in the technical committee’s report.
“It is the list that shows us clearly which service to levy and which ones are exempt,” he said.
That, he said, would guide the banks.
But the deputy minister said the indicative list, as presented in the technical committee’s report, would have to be agreed on by the stakeholders.
Parliament, in 2013, passed the VAT Amendment Act, Act 870, and was assented to by President John Mahama in December 2013.
According to the amended law, “financial services” means the provision of insurance; issue, transfer, receipt of, or dealing with money - whether in domestic or foreign currency - or any note or order of payment of money; provision of credit; or operation of a bank account or an account of a similar institution.
The attraction of financial services seems to be its rapid growth from 3.8 per cent of GDP in 2008 to five per cent in 2012.
Based on a financial sector GDP of GH¢3.4 billion in 2012, a 17.5 per cent VAT on the full range of financial services could raise around GH¢0.6 billion annually.