1 / 17

Belize General Sales Tax (GST):

Belize General Sales Tax (GST):. Issues for financial institutions. WHAT IS GST?. 1. Is a Broad-Based, Multi-Stage Tax on Value Added Broad–based: charged on a wide range of goods and services Multi-stage: charged at every level of the economic chain

kiora
Download Presentation

Belize General Sales Tax (GST):

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Belize General Sales Tax (GST): Issues for financial institutions

  2. WHAT IS GST? 1. Is a Broad-Based, Multi-Stage Tax on Value Added Broad–based: charged on a wide range of goods and services Multi-stage: charged at every level of the economic chain Value added: is a tax on the mark up on goods and services supplied by one business to another or to the final consumer

  3. WHAT IS GST (cont) • A transaction tax on supplies • Charged on each and every transaction involving the supply of goods or services, including business to business and business to consumer transactions • A consumption tax • Passed on to consumers in price of each consumer transaction

  4. MAIN FEATURES OF GST • RATES - STANDARD RATE IS 10% • - ZERO RATE (0%) • THRESHOLD $75,000.00 PER ANNUM • PRICES CHARGED TO BE GST INCLUSIVE • EXEMPT AND ZERO RATED GOODS OR SERVICES

  5. Types of supply (≈ outputs/sales): • taxable supplies (standard-rated and zero-rated) • exempt supplies • non-taxable supplies Tax is only charged on taxable supplies: (a) supplies(b) made in Belize(c) by a taxable person (registered or required to be)(d) in the course or furtherance of the business, and(e) not exempt

  6. Exemption = main issues for banks Net GST payable = output tax – input tax • Consequences of exemption: • no tax chargeable on exempt supplies • no input tax credits for the related inputs including overheads)

  7. “FINANCIAL SERVICES” MEANS  granting, negotiating, and dealing with loans, credit, credit guarantees, and security for money, including management of loans, credit, or credit guarantees by the grantor; transactions concerning money, deposit and current accounts, payments, transfers, debts, cheques, or negotiable instruments, other than debt collection and factoring; (c) transactions relating to financial derivatives, forward contracts, options to acquire financial instruments, and similar arrangements;

  8. “FINANCIAL SERVICES” MEANS  cont’d transactions relating to shares, stocks, bonds, and other securities, other than custody services; management of investment funds; provision, or transfer of ownership, of an insurance contract or the provision of reinsurance in respect of such contract;

  9. “FINANCIAL SERVICES” MEANS  cont’d provision, or transfer of ownership, of an interest in a scheme whereby provision is made for the payment or granting of benefits by a benefit fund, provident fund, pension fund, retirement annuity fund or preservation fund; a supply of credit under a finance lease, if the credit for the goods is provided for a separate charge and the charge is disclosed to the recipient of the goods; or (i) the arranging of any of the services in paragraphs (a) to (h);

  10. Functions of financial services intermediation provides cost efficiencies, pooling of savings, pooling of risks, & provision of liquidity transaction clearing services  cheques, credit cards… creation & maintenance of markets in financial instruments  provision of an efficient means for exchanging securities agency services reduce costs of geographical separation between buyers & sellers or securities by acting as agent in the transaction

  11. Categories of exempt transactions Deposit-taking intermediationbetween suppliers and users of financial capital; Risk intermediationbetween high risk takers & low risk takers; hedging & gambling Insurance intermediation:pooling risks to spread exposure of the risk; Brokerage services:connecting buyers and sellers of commodities, currencies, & debt or equity securities.

  12. Problems created by exemption B2C under‑taxation where exemption applies to a consumer transaction the bank’s value added is untaxed B2B cascading over‑taxation where exemption applies to an intermediate transaction Incentive to in‑source/‘self-supply’ essential activities, rather than out-sourcing Incentive to outsource to offshore suppliers

  13. + = $12 $6 $4 + $2 Exempt financial services: B2C To customs To DGST $6 $4 $2 $10- 6$4 $12- 10$2 Wholesaler Bank Consumer Importer Cost: $60 Value added: $40 Sell for:$100 plus GST: $10 Taxed Price: $110 Cost: $100 Value added: $20 Sell for: $120plus GST: $12 Taxed Price: $132 Cost: $132 Value added: $80 Sell for: $212plus GST: $0Taxed Price: $212 Cost: $212(includes $12 tax)

  14. + + = $31 $6 $4 + $21 Exempt financial services: B2B To DGST To customs $6 $4 $21 $21- 0$21 $10- 6$4 Bank Retailer Consumer Importer Cost: $60 Value added: $40 Sell for:$100 plus GST: $10 Taxed Price: $110 Cost: $110 Value added: $20 Sell for: $130 Cost: $130 Value added: $80 Sell for: $210plus GST: $21Taxed Price: $231 Cost: $231(includes $31 tax)

  15. Loan Loan Lender Bank Borrower Interest Interest Why are financial supplies exempt? • 2 party supplier/recipient analysis breaks down – problematic for the tax credit mechanism • measurement problem identifying the value added on a transaction by transaction basis (separating interest from inflation and from underlying flow of financial capital) • allocation problem allocating the value added to particular recipients of supplies

  16. Approaches around the world All countries exempt financial services but some try to minimise problems this creates: • many have no specific provisions to minimise cascading & outsourcing problems • some countries tax insurance (very complex provisions) • some extend exempt treatment to a limited range of types of supply to the financial supplier • NZ zero-rates B2B financial supplies • some give partial input tax credits (ITCs) for financial supplies • many require reverse charging to deal with offshore outsourcing  Belize • some tax explicit fees but not implicit fees

  17. THANK YOU ?

More Related