Maravi

2011 budget stirs fear among banks

2011 budget stirs fear among banks
By Chiwoyu Sinyangwe
Mon 18 Oct. 2010, 13:10 CAT

COMMERCIAL banks in the country are worried the 2011 national budget will hurt the local financial sector, Bankers Association of Zambia (BAZ) chairman Saviour Chibiya has observed.

Finance minister Dr Situmbeko Musokotwane has proposed to, beginning next year, charge value added tax (VAT) on fee-based banking services at the standard rate.
The move means that other than interest on lending rate, fees charged for specified banking services would attract VAT.

Commenting of the developments, Chibiya said local commercial banks feared the measures would hurt growth of the local banking sector and stifle financial inclusiveness, especially towards the huge unbanked population.

He said the local commercial banks who hurriedly praised next year’s budget soon after its announcement opposed introduction of VAT on fee-based banking services at the standard rate.

“I don’t think so that banks will benefit. We have not looked at this in detail but we don’t want to give everybody an impression that banks wanted this so that they can claim VAT,” Chibiya said. “We don’t want this. Generally speaking, we have not done our number crunching but last week Wednesday when we had an industry meeting everybody was worried about the administrative cost that would go into this.

We were worried how this will contribute in terms of bank charges at the time we are all trying to figure out how we can reduce bank charges...And what this will mean in terms of deepening financial inclusiveness because we do have a large population that is unbanked and how we will compete with other non-bank financial institutions that are doing transfers.”

Chibiya said although the move would help raise money for the
Treasury, it would certainly hurt the local banking sector.
“…this is not the drive that is being driven by banks that we want to claim VAT,” said Chibiya.

“The fact that VAT is going up to me suggest that the government has done their calculation that we will claim much less and that is the point. This was the revenue raising measure; this was not something to help our industry...the overall numbers suggest that we are not going to benefit from this as an industry from the VAT side.”

Labels: 2011 BUDGET, BANKING ASSOCIATION OF ZAMBIA, SAVIOR CHIBIYA, SITUMBEKO MUSOKOTWANE

posted by MrK @ 5:00 AM