GRA suspends VAT on bank services

The Ghana Revenue Authority (GRA) has suspended the introduction of the 17.5 per cent Value Added Tax (VAT) on financial services originally scheduled to take effect on 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 on 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 more education of the public and adequate time for the banks to achieve the level of preparedness that would ensure a hitch-free implementation. 

Protest

The decision to impose VAT on financial services described as non-core financial services attracted protestation from the banking industry, including individuals who threatened to withdraw their money from the banks.

The Chief Executive Officer of the Chartered Institute of Bankers (CIB), Ghana, Mr Anthony Yaw Oppong, had stated earlier that Ghana’s unbanked population of about 70 per cent might be prevented from dealing with the banks in view of the directive to charge additional VAT on bank services.

He said the new charge could also impact on the number of services accessed by bank customers and added, “If I don’t have a critical need for a bank statement, I will not ask for it because I will pay extra.”

He maintained that while the VAT itself was not a bad idea, it would drive away potential customers from the banks because of the additional charges that would come with the new tax.

Pressure on government 

The government came under intense pressure from various quarters, especially unionised workers to withdraw the VAT.

The Industrial and Commercial Workers Union (ICU) called on it to urgently withdraw the VAT and began discussions with the tripartite committee, made up of the GRA, the Ghana Association of Bankers (GAB) and the Ministry of Finance, for the withdrawal of the levy.

The General Secretary of the ICU, Mr Solomon Kotey, had told the Daily Graphic that workers were being over-burdened with taxes that were eating away their disposable income.

“The value of our money is no longer anything that can take us any further when one is paid because the ripple effect is coordinating on every expenditure pattern of the land,” he said.

He described the new VAT as illegal, saying that salaries deposited at the bank were a net of all statutory deductions.

Finance workers’ threat 

The  Union of Industry, Commerce and Finance Workers (UNICOF) also threatened to embark on an industrial action if the government went ahead with the implementation.

The threat was contained in a letter addressed to the managing directors of 12 banks, the Minister of Finance, the President of the GAB and the Executive Secretary of the National Labour Commission (NLC).

The UNICOF General Secretary, Mr John Esiape had designated June 23, 2014 was the date for the strike.

Minority threatens court action

The Minority in Parliament also joined the fray when it threatened to drag the GRA and the Ministry of Finance to court if they insisted on implementing the controversial VAT on financial services.

The Minority Spokesperson on Finance, Dr Anthony Akoto-Osei, had warned that the "government will be perpetuating an illegality in the implementation of that law”.  

“When the bill came to Parliament, we opposed it on the grounds that it will impose an additional burden on consumers and businesses,” he was quoted as saying.