VAT on banking fees still a thorny issue

Dar es Salaam. Tanzania Revenue Authority has yet to start collecting 18 per cent Value Added Tax (VAT) on financial transaction fees as players remain embroiled in a tug-of-war on the modality and applicability of the levy.

Applicability of the tax has divided two organs within the Ministry of Finance and Planning, with the Bank of Tanzania saying the burden of the levy should be borne by the final consumer while TRA says it has to be shouldered by the service provider.

VAT to be charged on financial transactions has left commercial banks divided on what to do. Basically, VAT is refundable and the one paying has to demand a receipt, something that makes it increasingly difficult for TRA to apply even after the new financial year officially started on July 1, this year.   

Speaking during a media briefing on Tuesday, TRA director of education and taxpayer services Richard Kayombo said the taxman was looking at possibilities of collecting the VAT revenues without using electronic fiscal devices (EFDs).

He also said businesspersons and entities which are entitled to collect VAT revenues are those with annual incomes of at Sh100 million.