Office of the Premier Speaks on Bank Interest Levy

“In recent days, the Bank of Montserrat has issued a Public Education Release, entitled: “What is Bank Interest Levy?” This has stirred some public concern and there are certain points in the release that require clarification. Accordingly, the Office of the Premier wishes to inform the public and the media as follows:

“For almost forty years the Laws of Montserrat have included a Bank Interest Levy Act (which has been on the books since 1979). Section 3(1) of this Act tells us that:

“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.”

That is, since 1979, for every EC$ 1,000.00 of deposits on average over the previous year, any bank in Montserrat must pay to Government a tax of EC$ 5.00. (And yes, this is a tax on banks, not a tax on their depositors.)

The tax is due on July 1 st each year.

This applies to all banks, and this law has been on the books for almost forty years.

 In 2015, because of an inquiry by the Bank of Montserrat in 2012, Section 3(1) was adjusted by our Legislative Assembly. The tax was uncontroversial, and this was evidenced on Tuesday, May 26 th 2015, when all members of the Legislative Assembly (Government and opposition) supported the bill.

The 2015 amendment was done to make it quite clear that the required levy is 0.5% of the average deposit balances rather than on 0.5% of the average deposit balances. The correct method of working out the average deposit balances remains the same: banks are to calculate the average of deposit balances at the end of each month for the previous twelve months.

However, for some years (1993 to 2013), Bank of Montserrat was under supervision by ECCB, and did not pay the levy. It is no longer under such supervision, and so Bank of Montserrat — like any other bank here in Montserrat — is required to pay this longstanding tax. It has been taking steps to do so.

Bank of Montserrat made a recent public announcement that they would make quarterly charges on deposits, to pay the levy on the bank. However, there are other means by which the Bank could have covered its tax obligation.

Government has therefore begun discussions with the bank to find an alternative solution, one that avoids a burdensome situation for depositors. We expect that the Bank will reconsider its plan to pass the levy on to depositors and that it will inform the public shortly. The Government will continue to monitor this process.

Let us continue to work together for the good of Montserrat.”