Government taxes bank withdrawals
Daraine Luton, Senior Staff Reporter
IN ADDITION to fees which some legislators have deemed exorbitant, persons withdrawing monies from deposit-taking institutions will be hit with taxes as of June 1,2014 as the Government hunts revenue to help it meet its 7.5 per cent of GDP primary-surplus target this fiscal year.
The new tax, which will be a levy on withdrawals from deposit-taking institutions and security dealers, will be calculated on a graduated rate system, with withdrawals less than one million being subjected to a 0.1 per cent tax.
This measure will mean that persons withdrawing $1,000 will have to pay $1 in taxes. Conversely, persons withdrawing a sum greater that $20 million will have to pay a 0.05 per cent tax; those withdrawing more than five million, but less than $20 million will pay 0.075 per cent tax; and those taking one million to five million will pay 0.09 per cent tax.
Finance Minister Dr Peter Phillips said the measure was expected to gain $2.25 billion this fiscal year, and would provide the bulk of the $6.7 billion in new taxes which the Government was budgeting to collect this fiscal year.
North East St Andrew Member of Parliament, the Opposition’s Delroy Chuck, commented that the measure represents a “stupid tax” and urged Phillips to reconsider its application.
The new withdrawal tax will apply to electronic banking, point of sales, cheques, and withdrawals at ABM, ATM or ETM as well as over the counter and internet transfers, with the exception of transfers between accounts of the same person in the same financial institution.
Phillips said the tax was to be collected by financial institutions and paid over to the tax authorities on a monthly basis.
The Government is proposing to spend $540.1 billion this fiscal year and is expecting to raise $421.2 billion to go towards its financing. Phillips said loans of $110.9 as well as the utilisation of $1.4 billon, which represents balances in the banking system, will be added to the $6.7 billion in new taxes to finance the Budget.
He further said the Government was projecting to raise $377.6 billion in taxes, which represented 9.8 per cent more than the out-turn last fiscal year. The tax revenue projected is estimated at 23.4 per cent of GDP, and includes $3.2 billion already announced for minimum business tax, the betting gaming and lotteries sector, as well as the tidying up of customs regulations.
Meanwhile, the matter of bank fees is now the subject of examination at the level of a parliamentary committee. A just-concluded study by the local think tank, Caribbean Policy Research Institute (CaPRI), has found that banks have been profiting from fees. The CaPRI findings are in line with a study by the Consumer Affairs Commission which has reported that an analysis of data it gathered on the rates and fees charged by commercial banks in Jamaica for 2009 to 2013 revealed that since 2009, with respect to savings accounts, both the withdrawal and deposit fees at the Bank of Nova Scotia have experienced a 115 per cent increase, moving from $100 to $215.
It said for the National Commercial Bank, withdrawal fees were also increased by 115 per cent, moving from $100 to $215.
The commission said the cost of withdrawing funds from savings accounts at RBC Royal Bank has moved from free in 2009 to $175 in 2013, while the charge for withdrawing from savings accounts at CIBC FirstCaribbean Bank increased by 129 per cent, from $70 in 2009 to $160 in 2013.