Finance Minister Mlusu advises public to report to RBM if banks passes on VAT to customers

Finance Minister Felix Mlusu has advised the public to report to the Reserve Bank of Malawi (RBM) if they discover that their banks are charging them value added tax (VAT), which has come in effect on Monday, November 1.

Speaking on the sidelines of his visit to appreciate construction works of the Shire Valley Transformation Project in Chikwawa on Tuesday, Mlusu said banks are not supposed to pass on the VAT to customers.

Mlusu during his visit to appreciate construction works of the Shire Valley Transformation Project

He explained that VAT applies on non-banking services that banks charge for their services on transactions customers make, which is an earning on the part of the financial service providers — thus they need to pay VAT for — and not customer.

“It has nothing to do with the customers,” Mlusu said. “Customers should continue doing their businesses with banks because the fees they will be charged should be the normal ones they have always been charged on.

“The government will collect VAT on the earnings banks make on these charges and at no point should that be passed on the customers. Banks were not paying paying VAT on these earnings but now they have to.

“If customers discover they are being charge the 16.5% VAT, they should report to the Reserve Bank — which is the regulator of all banks for appropriate action to be taken.

Statement issued by FDH Bank after the introduction of VAT

“They are assured that their money shall be refunded if they shall be charged VAT,” said Mlusu, whilst asking the banks to stop issuing the SMSs informing customers of their intention to be charging VAT, saying this is misinformation.

The Minister’s explanation comes in the wake of a press conference Malawi Revenue Authority (MRA) as soon as Bankers Association Malawi (BAM) issued a public statement that “all fees and charges will be subject to a 16.5% VAT as per VAT (amendment) Act 2021”.

But MRA Deputy Commissioner General, Henry Ngutwa said at the press conference on Thursday last week that only non-banking services in the country attract VAT as according to the amended law — describing BAM statement is misleading and misinformation.

According to Ngutwa, the non-banking services that now attracts VAT include fee for providing statements, payment orders or transfers and charges for provision of online banking.

Others are credit card late payment fee or limit excess fees; charges for withdrawals from any ATM; fixed or variable fees for providing bank drafts, wire transfers and foreign currency exchange.

Also charges for cash handling such as counting, sorting and safe storage; fees for processing credit or debit card payment transactions including gateway fees and interchange fees between banks.

VAT is also on the interchange fees between bank and other financial institution or mobile financial payment service provider as well as merchant service fee or discount rate fee and point of sale (POS).

The confusion that arose created a furore, with Consumer Association of Malawi (CAMA) joining the outcry by appealing to consumers to immediately consider withdrawing their money from the banks and keep it safe in their homes.

In a statement issued on Saturday, CAMA executive director John Kapito had said with the current situation, it is dangerous for anybody to assume that there will be safety of their money at the Bank, saying “consumers will only wake up one day and only to find that their money in the bank has been wiped-out”.

Acting on behalf of “financially vulnerable members” of the Malawi public, Human Rights Defenders Coalition (HRDC) also engaged legal firm, Kawelo Lawyers to demand the Attorney General to suspend enforcement of the VAT on banks.

In a legal notice, Kawelo Lawyers had if the demands are not met and the law comes into force, the clients’ instructions are to proceed with Constitutional review of the “impugned amendments”.

Kawelo Lawyers explained HRDC was approached by the financially vulnerable members, who include women doing small businesses; the elderly who receive remittances from their children and grand children working outside of the country.

It also includes people living with disabilities, peasant farmers and other members of the community ejusdem generis.

Follow and Subscribe Nyasa TV :

Sharing is caring!

Follow us in Twitter
1 Comment
newest
oldest most voted
Inline Feedbacks
View all comments
Utopia
Utopia
28 days ago

Greedy politicians, the banks should simply reduce or eliminate such transactions unless they were making exorbitant profits from such transactions.

Read previous post:
‘Give solutions, not broken promises to the poor’ – Chakwera tells world leaders

Malawi President Lazarus Chakwera has asked the 120 world leaders gathered in Scotland attending a two-day Climate Change Summit in...

Close