Taxing Depositers' Balances Not Good for the Economy, Says Credit Union Head

8-4-16-BOM-LevyThe local bank announced on Wednesday it will be implementing a levy on customers’ accounts.
According to a public education release from General Manager Michael Joseph, as of September 30, 2016 the Bank of Montserrat will be deducting the bank interest levy for onward transmission to the Accountant General in the Government of Montserrat.
The action stems from a 2015 decision by the government to amend the Bank Interest Levy Act of #17 of 1978 and #10 of 1982.
The amendment states the following:

“Imposition of levy

(1) A Bank shall pay on 1 July in each year a levy of 0.5% of the average deposit balances which shall be computed as the average of the deposit balances at the end of each month in the calendar year immediately before the year of payment.

(2) Within one month of the end of the year of payment the levy for that year shall be recalculated as the average of the deposit balances at the end of each month in the year of payment.

(3) If the recalculated levy under subsection (2) is greater than the sum paid as levy by the Bank for the year of payment, a further sum representing the difference between the sum paid as levy and the recalculated levy becomes payable on or before 31 January next following the end of the year of payment.”

The levy will be taken from savings accounts and fixed deposits. Savings accounts will attract a 0.125% levy and 0.50% for fixed deposits.

The monies are to be forwarded to the government coffers.

Peter Queeley, St Patrick's Cooperative Credit Union

Peter Queeley, St Patrick’s Cooperative Credit Union

Peter Queeley, Manager of the St. Patrick’s Cooperative Credit Union said while the act is not applicable to his institution, they will be impacted as the Bank of Montserrat is one of its major bankers locally and as such their accounts will be taxed.

The announcement, he explained “speaks to the imposition of a levy on deposit balances defined as the Credit Balances in all interest bearing accounts including fixed and time deposits.

“Therefore a financial institution is free to pass those on to the customer on whose accounts the tax is levied. Financial institutions are the custodian of customers funds which are held in deposit balances. The owner of the funds is the customers or members. If you impose a tax or levy on the balances you are imposing a tax on the customers because they own the balances not the bank.”

Mr Queeley noted that based on his review of the most recent audited financial statements of Bank of Montserrat the levy will translate into approximately EC$700,000 annually going to the government.
He said BOM had dropped the corporate savings rate from 2.0% to 0.75% and now with the 0.5% tax, Corporate Customers will only get 0.25% interest per annum. Adding, this would be catastrophic for corporate clients and discourages investment.
“The credit union is concerned about the possible local financial systemic issues that can occur as a result of the Bank Interest Levy,” Queeley, who is also a financial analyst stated.

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