TRA warns banks, cellular firms over fees
Financial inclusion in Tanzania is below 30 per cent of the total able population, and the increment in the cost of financial services fees, resulting from higher taxes, works against promoting greater financial inclusion. Particularly so, bearing in mind that it is individuals who will ultimately bear these costs. Many disadvantages arise when people avoid using the formal financial services sector.
What you need to know:
- TRA Commissioner General Alphayo Kidata says service providers are not supposed to pass on the tax which is charged on the money they gain
- TRA warns errant service providers against passing on VAT to customers, saying they risk being heavily penalised
Dar es Salaam. An 18 per cent value-added tax (VAT) on financial transaction charges should be borne by service providers and not end users, the Tanzania Revenue Authority (TRA) stressed yesterday.
TRA Commissioner General Alphayo Kidata told journalists yesterday that service providers were not supposed to pass on the tax which is charged on the money which they gain.
He warned errant service providers that they would be heavily penalised.
TRA organised the news conference following public outcry over the issue. Social media were awash with public sentiments after a number of banks notified their customers of increases in service charges.
The banks said in their notices that they had been forced to raise the charge after the government imposed VAT on service charges.
Mr Kidata insisted that the 18 per cent is only levied on charges received by the banks and other financial institutions after rendering financial services to their customers.
He said service providers were wrong to pass on the tax to end users and the government would deal with them.
According to Mr Kidata, formerly the charges that customers were paying to financial institutions were not taxed and the institutions were pocketing all the money.
“That is why the government introduced this tax. It intends to tax service providers. This charge has nothing to do with consumers. I warn all institutions that have announced increases in service charges as a result of the new tax. They should focus on rendering their services lawfully. In fact they are supposed to provide proper education to their customers that the increase does not mean they should also increase charges.” He also allayed fears that all financial transactions would be subjected to the 18 per cent VAT deduction.
He noted, for instance that a person who does a transaction which attracts a service charge of Sh1,000, it is only that amount which goes to the service provider and it will be charged at 18 per cent.
“This means that only Sh180 will be deducted from the service charge leaving the service provider with Sh820. Earlier these institutions were pocketing all Sh1,000,” said Mr Kidata adding that TRA will issue directives regarding the operationalisation of the new charge.
According to Mr Kidata, one bank, which he did not mention, has instructed its customers to pay the VAT in cash over the counter if the client does not have an account with the bank. “TRA insists that VAT should be charged and collected in a normal way as a fee on financial services as it is currently collected. Financial institution or any other person is advised to refrain from issuing to the public misleading statements which might lead to confusion in tax compliance or else such a person or institution shall face strong legal action. And those who have issued such directives are urged to correct their notifications to the public immediately.”
Mr Kidata the same apply to mobile money transfer charges.
He called on the public to report to TRA about any charge increase in mobile money transfer transactions.
