VAT on bank services is ‘harmless tax’ – Jumbe
Economist and former finance minister Friday Jumbe says newly-introduced 16.5 percent value added tax (VAT) on some banking services is a “harmless tax”.
The Bingu wa Mutharika administration introduced the tax on banking services as one of measures of sustaining the zero-deficit budget.
Commercial banks fear the VAT will negatively impact the country’s banking culture and the Bankers Association of Malawi have been lobbying government against implementing the move.
Bankers argued that they will need to buy and install new technology to enable automatic VAT deductions. They also want to pass the VAT onto their customers.
However, Jumbe backed the controversial tax measure, saying the commercial banks should be able to absorb the tax without passing it on to customers.
“If commercial banks cannot pay taxes, no one should be paying taxes,” Jumbe told a local radio,
“And if these banks would react negatively and decide to pass it on to customers, it will backfire as Malawians would find it not worthwhile to continue consuming their services. To me, this is one of the harmless taxes so far,” he added.
Jumbe, who served as Finance Minister in the Bakili Muluzi government’s last two years, observed that the impoverished are being taxed more because the tax regimes are poorly administered.
He noted that many wealthy people “ have developed strategies” for evading tax.
“We must work to shift this burden from the poor to the rich so that most Malawians should be having something in their pockets,” Jumbe said.
MRA Public Relations and Tax Education Manager, Steve Kapoloma, said the VAT is not applicable for general banking services such as depositing, withdrawing or using the Auto-teller machine (ATM) but only on “processing fees that commercial banks impose on customers such as loans.”Follow and Subscribe Nyasa TV :