Ato Forson and Ace Ankomah

Ato Forson and  Ace AnkomahThe Deputy Minister of Finance, Cassiel Ato Forson, has reacted to recent comments by lawyer Ace Ankomah on the 17.5 percent tax on financial services.

Ace Ankomah, a prominent lawyer, had indicated??that the current interpretation of the new tax by the Finance Ministry is not accurate.

Below is a post on the Facebook wall of the Deputy Minister, Ato Forson, which refutes Mr Ankomah’s views on the new directive from government:

In as much as Item 19 of the First Schedule to the Value Added Tax Act, 2013 (Act 870) provides inter alia that an exempt supply includes a supply of financial services, excluding financial services rendered for a fee, commission, or a similar charge, there is room to clarify the scope of financial services for which this provision is intended by way of Regulations.

It is because the VAT was not intended for all services provided by the financial sector that is why the word ?excluding? was used, meaning the law is deliberately not including some financial services, which as a term of art the word ?core? was used to address such financial services and ?non-core? to address the financial services on which the VAT is to?apply

.We did not by any imagination or reference imply that the law used the words ?core? and ?non-core?.

Provision has been made in section 30 of Act 870 to allow the Minister of Finance to, by legislative instrument, make Regulations to prescribe for the supply of goods and supply of services.

For the avoidance of doubt the said section 30, in subsection (1) provides that ?For the purposes of section 20 to 29, the Minister may, by legislative instrument, make Regulations to prescribe rules to determine whether a transaction constitutes (a) a supply of goods; or (b) a supply of services.? (Emphasis mine) It is instructive to note that indeed included in the supply of services for which the Minister may make Regulations is, as provided under section 20(1)(b) a supply which is not a supply of goods or money (emphasis mine).

It will be appreciated that this provision obviously excludes some financial services, viz supply of money and the making available of a facility, which by all intents and purposes is a core function of financial institutions, hence the Minister being given the prerogative to make Regulations to clarify the above per section 30 of Act 870.

Indeed section 64(1)(j) provides, inter alia, that the Minister may, by legislative instrument, make Regulations to provide for any matter necessary for the effective implementation of this Act (emphasis mine). Thus the Regulations will not be in breach of provisions of the parent Act but rather complement the Act. Furthermore, such Regulations will thus in no way be derogation from the parent Act and will in no way be a breach of any section of the Act.

With all due respect section 45(5) of Act 870 alluded to provides for adjustments in respect of deductible input tax and not exemptions. If it is section 66(5) that was being alluded to, then unfortunately it deals with an exemption or zero-rating and not by any means imputing that a Regulation to clarify provisions in the parent Act is not permissible.

Following from the above, it is evident that the call for a withdrawal of the law is not the way to go since the Act provides per sections 30 and 64 for Regulations to be made for the proper implementation of the Act, which in our present case will include the listing of the indicative financial services for which if a fee, commission or similar charge is imposed will occasion VAT.

Source: ?Myjoyonline


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