Taxing Banks

The banking sector is planning to pass down a 10 percent Value Added Tax imposed on it from next year.rn

rnLending rates are expected to go up proportionately when the tax is charged on the net profit and employee related expenditure. rn

rnBut, the question troubling most borrowers is how much additional interest will they have to pocket out. rn

rnAnd bankers are up in arms over the imposition of value added tax on financial services. The VAT was introduced as an additive tax where input and output credits are not allowed. Bankers say lending rates might be affected.rn

rnldblquote The total salary bill of the banking system is about Rs. 10 bn to Rs. 13 bn. And the total profits of the banking system is around six billion,
dblquote says Ajantha Madurapperuma of Seylan Bank.rn

rnldblquote When you put the figures together it is about Rs. 19 bn as the liable amount. There are rough estimates of course. And if you take the total advances of the banking system which is around Rs. 450 bn to Rs. 500 bn, a