Ace Ankomah’s take on 17.5% VAT on Financial Services

I haven’t ranted in a while, but I gotta… so…
I am on the case of the DEPUTY Minister of Finance, who, on JoyFM’s Super Morning Show, claimed that the extension of VAT to cover financial services rendered for a fee, is limited to Banks’ “non-core” businesses. He is no small boy or mean personality, and so what he says ought to be taken seriously, and we ought to interrogate it to see whether… or not it is backed by THE LAW!

Sir, under the new VAT Act that Parliament passed in 2013 (specifically the combined operation of section 35 and Schedule 1), “financial services” are generally exempt from VAT unless the services are “rendered for a fee, commission, or similar charge.” And “financial services” are defined as “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 with a similar institution” [Emphasis mine.] The key distinction between this definition and what existed under the erstwhile VAT Act of 1998 (Schedule 1, Part 1, item 16), is the removal of the words “excluding professional advice such as accountancy, investment and legal.”

In other words, now, as long as the bank charges me for providing any of services whatsoever, I am supposed to pay an additional 17.5% of that charge as VAT, to the bank, which amount will ultimately be paid to the government.

So, sir, within the context of the new law, where do you get your voodoo “non-core” and “core” dichotomy argument from, which argument is now being trumpeted by government communicators? Plainly, it is not supported by the plain text and even the spirit of the law. Note, once gain that under the old VAT Act, what your allege as ‘non-core’ was already subject to tax by the provision that the exemption “[excludes] professional advice such as accountancy, investment and legal.”

Further, the new law makes a clear distinction when it comes to life insurance and reinsurance, so that that service is completely exempt “whether or not it is rendered for a fee, commission or a similar charge.” So, “financial services” are ‘vattable’ as long as there is a fee for it. In other words, I only escape VAT on the provision of financial services if my bank does not charge me for it. Simply, once there is a charge, there is VAT.

Sir, please stop saying things that are not backed by the law. If you and the government now want to go back on the clear and express terms and provisions of the law, you are allowed to “eat crow” and go back to Parliament for an amendment. But as the law stands, what you said on JoyFM was also wrong!! And neither you nor your Minister have the power to issue regulations (Legislative Instruments) that derogate from these provisions of the parent Act. Your attempt at a selective application of the provisions of the Act, amounts to an attempt to vary the exemption provisions of the Act, in clear breach of section 45(5), which provides that an “exemption… provided outside the VAT law, shall not come into effect… until a corresponding amendment is made to [the] Act.” And, I am also struggling to find the provision in the new Act (similar to the erstwhile section 79) that empowers you and your minister to defer the application of the provisions of the Act to May or June or whichever month you claimed.

The Act came into force when the President assented to it on 30th December 2013. Thus the VAT must be paid. And if you send a draft LI to Parliament that purports to amend the clear terms of the Act, Parliament must exercise its article 11(7)(c) powers and annul it by a two-thirds vote.

This article has 0 comment, leave your comment.