TRA clears air on VAT extent

ROSE ATHUMANI

TRA Commissioner General (CG), Mr Alphayo Kidata

THE 18 per cent Value Added Tax (VAT) on financial transaction charges should be borne by the banks and financial institutions and not customers, the Tanzania Revenue Authority (TRA) has maintained.

TRA Commissioner General (CG) Alphayo Kidata has pointed out that the financial institutions should have sought clarification from the revenue authority before misleading the public. He was speaking to the ‘Daily News’, when this newspaper sought clarification on the controversy surrounding the new charges.

Referring this reporter to an advertisement published in yesterday’s issue of “Habari Leo’’ maintaining the TRA position, Mr Kidata wondered why the same banks did not involve the public on the fees they charge.

“How comes these banks have not provided public notices when imposing charges on financial transactions but found it necessary to do so in this issue? If there were any queries, why didn’t they seek clarification from the TRA?” he wondered.

He noted that the same banks, which have branches abroad, do not charge any fee when their customers withdraw money from ATMs or when issuing financial statement printouts, ‘‘only doing so in Tanzania’’.

“They must respect their Tanzanian clients and stop stealing from them. Some of these banks have branches abroad and do not impose any charges on financial statement printouts or when withdrawing money from ATMs.

Why Tanzania then,’’ he queried. Mr Kidata stressed that the 18pc VAT is levied on charges received by the banks and other financial institution after providing financial services to customers.

Previously, the financial institutions pocketed all the service fees without being taxed. Several banking institutions had taken to the media announcement, indicating an increase in service charges as a result of the new VAT Act of 2014 amended recently.

In the Public Notice advertisement assigned by the TRAs CG, titled clarification on ‘VAT on Financial Services’ it went on to say that the recently amended VAT Act of 2014 will be levied on all fees charged by banks from its customers.

The public notice allayed fears raised from reports circulating in the social media that the 18pc VAT will be levied on consumer deposits.

“This is not true; the 18pc VAT will be levied to service fees charged by banks and other financial institutions,” read the public notice in part. Citing an example, TRA noted that if the fees charged on a financial service is 1,000/-, the VAT thereon would be 152.50/- and the bank would remain with 847.50/-.

The VAT amount of 152.50/- will be collected and remitted to the government by the respective bank or financial institution. TRA further noted that that reports issued by one bank operating in the country, instructing its customers to pay the expected VAT in cash over the counter if the customer does not have an account with the bank that the respective transaction was wrong.

“VAT charges shall be instituted and collected in the normal way as fees on financial services are currently being collected,” the public notice read in part. TRA has also directed all banks that issued misleading information to the public to refrain from doing so and correct the reports issued to the public and publish the correct information.

The controversy as to who should carry the 18pc VAT emerged after Bank of Tanzania (BoT) Governor Professor Benno Ndulu supported banks and financial institutions that the tax should be borne by customers.