Ghana goes ahead with VAT on banking from June 2014
- 24 April 2014 | Richard Asquith
Following a failed launch in January 2014, Ghana is to go ahead and include banking and other financial services within the Value Added Tax net.
Banking subject to 15% VAT
The 2013 Budget included a Ghanaian VAT rise to 15%, and the inclusion of financial services as subject to VAT for the first time. However, by the end of 2013, it became clear that the banking sector’s systems were not prepared for the complex change. The Ghanaian VAT on banking was delayed at the start of 2014.
The 15% VAT rate is accompanied with a 2.5% National Insurance Levy, meaning the total consumption tax charge is 17.5%.
Following extensive discussion between the industry and the Revenue Authority, the green light has been given for the implementation on 1 June 2014. THe inclusion of financial services within the VAT net is to help offset the cut in government revenues from reductions in import tarriffs.
EU does not subject banking to VAT
In most countries, financial services, such as insurance and banking, are exempt from VAT. This is because of the challenging of determining the transactions points along the chain and the value added. The European Union abandoned a plan for a VAT Directive on Financial Services in 2012. 11 EU countries are instead exploring a financial transaction tax on trading of shares, bonds and derivatives.