GRA engages banks on tax directive

The new directive by the Ghana Revenue Authority (GRA) to extend the tax net to cover financial services will take effect as soon as ongoing interactions with the banking community to identify the chargeable products and also reconfigure their systems are sealed, says Director-General George Blankson.

“The Ghana Revenue Authority is currently interacting with the banking community to firmly agree on the list of products on which Value-Added Tax (VAT) can be charged, and also reconfigure their systems to be able to tax those products.

“As soon as the negotiations are completed, the tax on financial services will take effect,” he told B&FT in an interview on the sidelines of the 3rd WAUTI international tax conference in Accra.

The new tax law -- Value Added Tax 2013, (Act 870) -- has extended the coverage of tax payment to some business activities which were hitherto outside the tax net. These include the sale of immovable property by an estate developer, insurance, and the supply of financial services that are rendered for a fee, commission or a similar charge.

For insurance, life insurance and reinsurance services are, however, exempt from the tax -- whether or not such services are rendered for a fee, commission or a similar charge.

Mr. Blankson, however, clarified that the tax on financial services will exempt the core products of financial intermediation which are otherwise the core functions of the banking system.

“One point that must be clarified regarding the VAT on financial services is that, first of all, the law exempts the core functions of bank system -- which include receipt of deposits and payment of receipt on deposits, as well as granting of loans and interest charged on the loans.

“No VAT will be chargeable on deposits, loans and interest charged on deposits and loans. These are exempt from the new directive; it is only services relating to them on which fees are charged that VAT will be chargeable on the fees,” he said.

The two-day conference, under the theme “Tax Policy, Investment and Regional Integration: Challenges and Lessons,” brought together tax experts from across the West African sub-region to pool ideas toward an efficient and sustainable tax regime to boost intra-African trade.

By Patrick Paintsil | B&FT Online | Ghana