The recent announcement of the change in the Value Added Tax rate from 14% to 15% effective 1 April 2018 did not leave much time for companies across different industries to amend their systems to accurately implement the VAT rate increase from that date.
Some of the industries that will be most affected by the change are the financial services sector and the insurance industry. Yusuf Bodiat of Lion of Africa recently reported in FANews that “not only will all companies need to update their systems, they will also need to train staff, communicate to customers and ensure nothing slips through the cracks, all in a very short space of time.”
In his article Yusuf highlights some of the complications that the industry faces and questions if all the implications were considered.
Some of the examples of the simpler complications that he mentions:
- If a policy is written at 14% and subsequently cancelled (at 15%), how much is the refunded amount? One would think it would be at 14%, but what if there were additions/endorsements to the cover before or after 1 April 2018?
If a policy is incepted and the cash is received by a broker in March 2018 and paid over to the insured in April 2018 (within 15 days), does the insurer have sufficient information at the end of March to capture the transaction accurately?