By Victoria Ngozi Ikeano
It is no exaggeration to say that bank customers are about the most taxed group in Nigeria as they suffer not just double or treble taxation, but more than quadruple taxation. You are charged for just about anything you do with your own money. More discomfiting is that having charged you for that, they tax you a second time for it by way of value added tax (VAT). Money is meant to be spent, to be used to cover basic necessities as purchase of food items, payment of rent, electricity and other utility bills, school fees, giving pocket money, transferring money to those in the village for their upkeep, etc. Even if you did not make any withdrawals /transfers on your account, you will still be taxed for keeping your money in the bank; it is called ‘account maintenance fee’, you will also pay another VAT on this. What is this maintenance fee all about, just what is the bank maintaining or servicing when one already pays something anytime one’s account is ‘touched’ both inwards (deposits by yourself or third parties) and outwards (withdrawals) plus the VAT on top .
So, having been charged for apparently, updating my account anytime there is a withdrawal or deposit, what is the service/maintenance fee still about? Is it still for keeping records of deposits and withdrawals which is done automatically each time you do anything with your account (deposits/withdrawals) via an SMS alert that is taxed and vat paid too for every single transaction? Don’t tell me that the service/maintenance fee is perhaps for the ATM card they issue customers. That has its own separate charge – monthly charge for ATM card for which as with everything with the banks, VAT is again paid. Even for a basic thing as buying a recharge card from your bank money, the SMS sent to notify you that your SIM card has accordingly been credited with the requested amount you pay for and you pay additional VAT on this and other SMS alerts. Lest I forget, there is also stamp duty with additional VAT payment.
Consider the taxation trajectory of a single transaction in your account – When you make a transfer of for example, N5000 to someone in dire need in this harsh economic times, a certain amount is charged you for this funds transfer, plus 7.5 percent of that amount as VAT payable on the transaction, then charge for SMS alerts sent you plus the accompanying VAT, an account maintenance/service fee is deducted from your account at end of the month with the VAT on it, another monthly fee for your ATM card (even if you did not use it for the whole month), with appropriate VAT on it and also Stamp duty with its own VAT payment . So, for just this single operation, you are charged five times and also pay additional value added tax five times. That is more than quadruple taxation! Consequently when you are sending money to someone via bank transfers you have to be aware of these multiplicities of deductions on you and also on the recipient.
In effect the person would be receiving less than the envisaged sum. The individual deductions appear relatively small but little drops of water make an ocean. The leverage is high for, when you consider that banks have millions of customers, then you would be astonished at the millions of naira they rake in from customers daily and billions every month from these numerous charges cum taxes. Consider too that a N5,000 balance in your account that you do not touch, making no withdrawals or deposits on it, gets wiped out overtime, leaving you with zero naira balance because of these countless charges/fees.
What can our commercial banks ever do free of charge for their customers? Nothing. You pay for a token given you for internet banking, you pay for the ATM card given you to enable you undertake banking operations at automated teller machines, and also tax you every month for use or non use of this card by way of monthly ATM maintenance fee on top of which you pay value added tax simultaneously. They even still charge you for giving you a print out of your statement of account. Meanwhile they are trading with your money and making profit off it. Meanwhile the ATM machines sometimes do not dispense cash while your account is already debited for cash withdrawal not received. Meanwhile an internet transfer through you smart phone or laptop tells you there is an error in processing and you repeat the operation only to find that you have been debited twice for same thing.
Central Bank of Nigeria’s cashless policy that has now covered virtually all states in the federation plus the federal capital territory (Abuja) has forced the average Nigerian to have a bank account. Whether the many fees deducted from customers’ accounts with every single transaction is an encouragement or disincentive to embedding the banking culture in Nigerians, you can deduce yourself. However, fact remains that people would prefer to be given cash with its full value intact than to be given same through transfers with concomitant erosion of value through the more than quadruple taxations. Some have sought to evade one of the charges by not requesting for SMS alerts on their accounts and also buying paper recharge cards only.
That is as far as they can go for all the other charges appear to be compulsory – a consequence of your getting a bank account. But why must VAT be paid on every one of the charges, again and again? VAT is a sales/service tax payable usually on luxury items. Buying a recharge card via one’s bank is a basic necessity of today’s digital world, why pay VAT on it again for the paid SMS alert? If government is pressed to increase its revenue, there are other ways to do it rather than slamming bank customers with numerous taxes in form of charges and VAT. Bank customers are overtaxed. The government can spread its tax net further afield to bring in more people, especially the rich and affluent. Millions of other Nigerians do not pay tax and the incidence of tax evasion is pervasive. Hapless bank customers should be given a reprieve.
Already, virtual banks with no physical office are cropping up on the internet, promising customers zero transfer fees and zero charges for some other banking services. Nigerians may begin to flock to these nouveau digital banks in future to free themselves from current suffocating bank levies, fees, charges, taxes. For now, Nigerian bank customers need some breathing space by way of elimination of some of these taxes which are apparently aimed at maximizing bank profits.
Ikeano, a journalist, writes via [email protected]