17.5% financial services VAT to reduce cost of services

Some financial institutions have assured customers of lower cost of services with the implementation of the scrapping of the 17.5 percent VAT on financial services.

They contend that the development will increase patronage and attract more people currently in the unbanked population.

The Ghana Revenue Authority (GRA) last week directed all financial institutions to stop charging the tax after the repeal of the VAT Act in March 2017.

The financial institutions say the move will reduce cost of services to clients.

The Chief Executive Officer of Beige Capital, Mike Nyinaku explains to Citi Business News clients will now be guaranteed services at cheaper cost.

“It is positive news because it makes the cost of service cheaper to our clients so it is also a welcoming relief. Because it affects pricing and naturally it makes services more expensive to clients so once that is scrapped, we are happy. We will therefore not frontload it to clients,” he said.

“…In any case as banks were charging we had just become a conduit for passing on the cost to clients and thus collecting tax on behalf of government. So once we are not doing that anymore our clients will have a reduction in the cost of services.” he added.

Some banks in the country have since begun complying with the directive from the GRA .

The banks have sent messages to their customers, notifying them of removing the 17.5 percent VAT charges on financial services.

Citi Businesss News can confirm that Ecobank, CAL Bank,UMB bank, Unibank, and Zenith Bank, among others have sent text messages to their customers announcing the ceasure of the charges.

It is expected that all banks will send messages to their clients to notify them as part of creating awareness.

Already, some stakeholders in the banking sector have expressed excitement at the move asking banks and all financial institutions in the country to quickly abide by the directive.  

One of the major advocates for the scrapping of the VAT on financial services is Banking Consultant, Nana Otuo-Acheampong.

Nana Otuo-Acheampong had described the charge as a disincentive to the growth of the banking industry.

After Finance Minister, Mr. Ofori-Atta announced the abolishment of the charge, Nana Otuo-Acheampong was optimistic the move will inure to the benefit of Ghanaians.

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By: Jessica Ayorkor Aryee/citibusinessnews.com/Ghana.