Duty on credit card transactions creates stir

Shirajiv Sirimane

DUTY: The banking sector is up in arms against the imposition of a stamp duty on credit card transactions.

According to Act No 12 of 2006, it will commence charging a stamp duty at the rate of Rs. 10 for every Rs. 1000 or part thereof spent monthly on credit cards. (Stamp duty will not be charged on interest or other levies).

Manager Card Centre Seylan Bank, Tissa Nanayakkara said that it is a move that will discourage credit card users and promote debit cards which has a point one per cent tax.

"With credit promotions all over Sri Lanka the cards usage is no longer a luxury and an average person spends around Rs. 5000 per month," he said.

"However this will definitely have a negative impact on the 'small time' card user," officials said.

"People will now try to use cash for their day-to-day transactions as for each Rs. 1000 spent they will have to pay additional Rs. 10," he said. Manager Hatton National Bank Card Centre, Zeyan Hameed said that due to the convenience of carrying plastic money more people are using credit cards.

"In the past few years there has been a major growth in this area," he said. Internet buying from credit cards too are gaining popularity and this move will also check on line transitions. This may have a negative impact on the usage of credit cards, he said.

An official from Sampath Bank said that it was too early to comment on the impact. Operations Manager HSBC Jamaes Rebert said that it is the Government duty to collect tax. "We are adopting a wait and see approach," he said.

A senior financial analyst said that carrying credit cards has helped to reduce crime, as people don't carry large amounts of cash. "This tax will force people to carry cash," he said.

"This would also lead to discourage new credit card applicants and also lead to people carrying cash. It would also lead to people using more debit cards," he said.

An official from the Treasury said this decision was taken after a series of meetings with the banking sector. "This move would have a unhealthy impact on the banking sector. We will review this after sometime," he said.