Online Reporter
Golden Sibanda and Mike Tome
ECONOMIC analysts have commended the ruling ZANU PF party’s decision to scrap the intermediated money transfer tax as a progressive and step in the right direction, noting this will reduce transaction costs for businesses and individuals alike, stimulate consumer spending and improve business confidence.
IMTT is a transaction-based tax levied on electronic money transfers initiated through financial institutions, mobile money platforms and payment service providers.
For US dollar transactions, a rate of 1 percent applies on every payment or transfer. Where a taxable transaction equals or exceeds US$500 000, a flat IMTT of US$10 150 is payable.
The tax is charged at 2 percent for each local currency transaction, Zimbabwe Gold (ZiG), up to the equivalent of US$500 000 at the prevailing interbank exchange rate.
Economists and business lobby groups, including the Confederation of Zimbabwe Industries, one of the most influential in the country, say IMTT has the effect of reducing disposable incomes thereby reducing funds for investment.
In response to Zimbabwe’s increasing use of electronic transactions, the Government introduced IMTT, which became popularly known as the 2 percent tax, to widen the tax base and fund public services.
The decision to dump IMTT is one of 15 key resolutions adopted at the end of the Zanu PF 22nd Annual People’s Conference held in Mutare last week, chief among them the directive for the Government to implement measures to stabilise the economy.
Significant progress has already been made in this regard following the introduction of the new currency, ZiG in April last year, which replaced the inflation prone Zimbabwe dollar, a development that has tamed stubborn inflation, which has averaged 0,6 percent since February, and steadied the previously volatile exchange rate.
Under the Resolution Four, Macroeconomic Stability, the Government was directed to address several issues, including coming up with measures to strengthen and intensify robust support for the Zimbabwe Gold (ZiG) to stand as the sole legal tender for domestic transactions from 2030.
Currently, Zimbabwe uses a basket of currencies dominated by the US dollar and ZiG.
The Government has also been instructed to enforce anti-corruption and anti-money laundering laws to eradicate speculation, arbitrage and other economic malpractices as well as accelerate venture capital to capacitate and increase the number of small and medium scale enterprises.
Zanu PF Party’s directive to the Government to scrap the IMTT dovetails into the ongoing business regulatory reform programme, which started with reviews for business conditions in the agriculture sector, a key anchor of Zimbabwe’s economy.
“The party directs the Government to promote formalisation and banking through the removal of the IMTT transaction charges and reduction of other bank charges, making ZiG more accessible, thereby promoting financial inclusion and promoting the nation’s monetary stability.”
Economist Namatai Maeresera said the decision to remove IMTT was “progressive and commendable, as this would bring relief to millions of Zimbabweans and businesses that had long borne the brunt of excessive transaction costs.
“It shows that the Government is listening to citizens and business voices calling for a friendlier environment . Removing this burden will stimulate consumer spending, improve business confidence and restore faith in fiscal policy reforms aimed at rebuilding trust between the State and its people. This is a decisive, people centred policy shift.”
Another economist, Mr Tawanda Mushore, noted that the resolution to abolish IMTT was “a step in the right direction, signalling the Government’s willingness to align fiscal measures with public sentiment and economic realities”.
“Businesses and consumers alike will welcome the relief. However, completely scrapping it may create a gap in Treasury’s revenue streams, which could affect public service delivery and capital projects.
“A balanced approach would have been to reduce the tax to 1 percent (across currencies), maintaining a modest but steady revenue source while easing the pressure on the economy. Caution and careful fiscal planning will be crucial to sustain the positive momentum this decision creates,” he said.
Development economist Mr Langton Mabhanga also said scrapping IMTT was a step in the right direction, however noting that more needed to be done to lower transactional and operational costs for individuals and businesses.
“Transactional costs in Zimbabwe are just too high, taxation is also high; it’s not just IMTT alone. Let’s go for more, bring down transaction costs so that we release money towards where it should go, like towards production. So, I think it is just the first step, let’s go for more,” he said.
