Bank Customers Panic At 17.5% VAT
Dr. Kofi Wampah, BoG Boss
Some members of the public have expressed anger at Government's decision to charge 17.5 percent on their banking transactions with effect from next month.
They have indicated that they might withdraw their savings from commercial banks if Government does not find other means of mobilizing resources for its operations.
'It's not easy to come by money these days. Government has been upwardly reviewing the prices of petroleum products every two weeks. This has translated into high transportation costs which eat deep into the pockets of the ordinary Ghanaian and Government is still not satisfied. Even though there has not been fortnightly review of wages and salaries to match up the increments, Government has this time resorted to extorting money from the few people, who save with the banks unjustifiably,' an agitated customer, who pleaded anonymity, told BUSINESS GUIDE yesterday in an interview.
Another bank customer described the move by Government as unpatriotic and injurious to businesses since Government had failed to widen the tax net to include more businesses to increase its revenue base.
Daniel K. Mensah, Executive Secretary of Ghana Association of Bankers, also noted: 'It's going to make the cost of people getting financial services more expensive. Already, microfinance institutions are milking their customers and with such a situation, the tendency that people will relocate to them is high. Initially, the tax was meant to affect all services offered by banks.
However, the Ministry of Finance, Bank of Ghana http://topics.bloomberg.com/bank-of-ghana/ (BoG) and the Ghana Revenue Authority (GRA) met banks operating in the country and identified the type of services that would attract VAT.
It would be recalled that Finance Minister Seth Terkper increased the VAT on goods and services to 15 percent last year from 12.5 percent to boost revenue.
This was after declining gold and cocoa prices and rising government wages led Government to miss its budget deficit target.
He compellingly advanced arguments to support the need to extend the tax net to include many businesses that were making huge profits but operated outside the tax net when he presented the 2014 Budget statement to Parliament last November.
By the foregoing, companies that manufacture or supply pharmaceutical products other than at the retail stage are to pay VAT.
Also, gymnasiums and spas, as well as domestic airlines and companies that deal in haulage have also been roped into the tax net.
But the Ministry of Finance, in a press release issued yesterday, stated: 'We wish to state categorically that salaries, savings, deposits, loans and payment with cheques are all exempt from VAT. The new VAT Act, Act 870 only affects fees that are charged on non-core financial services such as data processing, legal, accounting, actuarial, notary and consulting services.
'We also wish to state that this is not a new law, it has been in place since 1998. Banks were charging fees on services they were rendering. Banks are also already paying the VAT on inputs used to render these services.
'Act 870 requires banks to register for VAT and they can offset the VAT against the VAT they charge. Therefore, the impact of the VAT is not the full 17.5 per cent as being speculated. VAT registered businesses/persons can also offset the VAT (input VAT) they pay to the banks against their VAT (output VAT).
'The general public is also informed that this enforcement of the tax obligation should have started from January 2 nd 2014, but the banks were allowed till May to enable them to fully prepare to implement the new policy.'
By Samuel Boadi