The Value Added Tax (VAT) will be slapped onto some banking fees like use of Safety Deposit Box and Credit Cards from August 1, according to Acting Permanent Secretary in the Ministry of Finance, Mike Sylvester.
Sylvester accompanied Minister of Economic Development, Oliver Joseph to Tuesday’s post-Cabinet Briefing at the Ministerial Complex to clear the air on the issue of the banking fees.
Last week, the Grenada Bankers Association (GBA) issued a release stating that all banks that meet the requirement for VAT registration are required to collect VAT on specific bank charges on behalf of the Government of Grenada.
The release created a stir on the island as some persons commented that it was the government’s responsibility to make the announcement and not the island’s bankers.
Sylvester disclosed that the VAT being talked about is not applicable to transactions like borrowing and deposits.
“These have nothing to do with financial intermediation, have nothing to do with deposits and borrowing and so on but these are specific fees that are charged by the bank for specific services”, he said.
Sylvester indicated that since VAT was introduced in 2010 the services now being targeted were subjected to the tax.
“…I want to make the point that since the introduction of VAT back in 2010, certain fees attracted VAT, they were vatable and so what you (have) seen and heard in recent times, it has nothing to do with a new tax that is being implemented, it has nothing to do with the broadening of the VAT base and I want to make that clear,” he said.
The PS Finance pointed out that only certain specific banking services that are known as “explicit banking services” will be taxed under the incoming regime.
“For example, if you have a safety deposit box and there is a fee that’s related to that, of course VAT is chargeable on that particular issue.
“If you have a credit card for instance, a renewal fee, VAT is chargeable on some of those fees, if you want to buy a cheque book, there is a fee for that.
Sylvester also used the opportunity to distance the ruling New National Party (NNP) administration on the recent increases in some commercial banking fees.
He said these banking fees that took effect in some countries across the region is not something that is regulated by the Eastern Caribbean Central Bank (ECCB).
“You had an increase in banking fees over the years and of course you see what has happened in St. Vincent and some of the islands where persons are clamouring with respect to increase banking fees…that is a separate issue, that is something that even the Central Bank put out a release on that saying that they are concerned…”, he said.
“…It’s not a thing that is regulated. I think the issue that they (ECCB) have to look at is seeing how best they can regulate those issues to avoid increases in banking fees and so on,” he added.
The high-ranking finance ministry official stressed that the ECCB is looking at ways and means to address that particular issue in order to avoid these ad-hoc increases in fees by commercial banks.
Recently, RBTT introduced a $25 a month charge on deposits in Grenada, which, the Minister of Economic Development said, has nothing to do with VAT or the ECCB but was done on the sole discretion of the bank.