Government says the newly introduced Value Added Tax on some banking services will not harm Ghanaians as perceived by many.

According to Felix Kwakye Ofosu, Deputy Information and Media Relations  Minister, the 17.5% VAT to be charged on some banking services is to enable government raise more funds to finance development projects in the country.

Public outcry over the policy has forced government to defer its implementation from January to June this year to pursue aggressive awareness campaign.

The pressure group, Alliance for Accountable Governance (AFAG) on Thursday demanded immediate withdrawal of the policy which it says would compound the woes of the people as the economy is already in a mess. The group threatened to hit the streets if the policy is not suspended within a week.

But speaking on the Midday News on Joy FM, Mr. Kwakye Ofosu said the regime will do more good than harm to the country.

"...steps have been taken to deepen public education and awareness and we believe that by the time all of that is over, Ghanaians will buy into the new regime and come to the conclusion that it is not something that will harm them but it is only to consolidate government revenue mobilisation efforts."

Admitting implementation of the policy would lead to additional hardship on the people, the Deputy Minister said government has to take the decision in the supreme interest of the country.

"Every new tax measure imposes an additional burden unto the people [and] it is not an idea that government is running away from, but it is necessary to introduce this tax in order that we are able to broaden our revenue base as we develop our country.

"And as our needs grow, it becomes necessary to find additional revenue...and that is what government seeks to do" with the introduction of the new tax regime.

Government and banks agree

In other developments, government has reached an agreement with commercial banks for the VAT on financial services not to be charged on salaries, savings, deposits, investments, interests or loans. 

This forms part of the major outcomes of an emergency meeting among the Finance Ministry, Ghana Revenue Authority and the Ghana Association of Bankers Thursday, on the implementation of VAT on financial services.

Deputy Commissioner for Policy and Programmes at the Domestic Tax Revenue Division at the GRA, Nii Ayi Aryeetey told Joy Business the parties reached a compromise for the tax to affect only fees or commissions that are charged on some financial services from June 1, 2014. 

The parties also agreed to intensify the awareness campaign ahead of the June timeline, Nii Aryeetey stated.