VAT Administration In The Financial Sector Group A Presentation

Contents VAT Issues in the Financial Sector Challenges Way Forward

VAT Issues In The Financial Sector VAT is charged based on fees, commissions or charges but is not fully harmonized. Terminologies can have different interpretation. VAT is applied on imported chargeable services (eg IT and Managerial services) but VAT input should be subject to certain rules. Apportionment method is where VAT inputs are allowed only in relation to the taxable supplies, for example: VAT on electricity, IT service. Registration should be based on the threshold not on everybody involved in the economy.

Challenges Capacity of Tax Administration, particularly on IT based audit for financial sector’s income. No adequate sensitization. E-commerce: Most activities are happening there. Tax administration has to understand these transactions properly.

Way Forward Effectively engage the financial sector stakeholders for example Bankers association in decision making. Expose the banking software to the Tax Administration Enforcement and Audit staff. Stakeholders’ involvement: because the sector is changing due to the technological advancements, the Tax Administration need to be aware and adjust the legal framework it to .

Way Forward Cont’d. Transfer pricing issue: Tax Administration should train its staff because transfer pricing erode the VAT base. Confidentiality of banks: Tax Administration should be backed by the law so that the banks’ customers/clients financial information can be acquired easily. Strengthen capacity building in IT systems and in financial services products. Information sharing among VADA countries.

Way Forward Cont’d. Investing in IT infrastructure: interfacing the domestic tax system with banks, ministry of finance, government procurement. Mutual administrative assistance in tax matters. Engaging Lawyers with experiences in financial sector in tax legal cases.

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