malvernmugadzikwa
Golden Sibanda
TREASURY will soon review the intermediated money transfer tax (IMTT) for Zimbabwe Gold (ZiG) to standardise the transaction tax thresholds for both local and foreign currencies, according to Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu.
Expectedly, this would entail the reduction of the IMTT on ZiG, which would go some way in cutting down costs associated with tax when transacting or transferring money.
This comes as businesses have previously lobbied the authorities to either reduce the IMTT or scrap it altogether, arguing it was a significant additional cost given the several taxes already levied on businesses, and had the effect of pushing prices of goods and services up.
In 2022, Treasury increased the IMTT for electronic foreign currency payments to 4 percent to encourage people and businesses to transact in the local currency, but it has since cut the tax to just 1 percent following an outcry over the unsustainable cost burden in a highly dollarised environment.
It is estimated that about 85 percent of transactions in Zimbabwe are conducted in foreign currency and the balance in the domestic unit.
IMTT is a tax levied on electronic payments or transfers made by either an individual or corporate entity. The tax does not affect the receiver of the payment but the payer transacting to settle obligations for goods and services received.
Responding to questions from legislators during a Parliamentary Portfolio Committee on Industry and Commerce session last week, Dr Mushayavanhu said Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube had agreed to standardise the IMTTs for ZiG and forex transactions.
Notably, the IMTT now forms an important part of Treasury’s revenue measures. Minister Ncube is on record saying the tax will not be removed anytime soon given the Government’s limited fiscal space and the positive impact it has recorded.
Dr Mushayavanhu said Minister Ncube would soon review the transaction taxes to bring them at par following the introduction of the new currency, ZiG, on April 5, 2024.
“I am pleased to say that we discussed this with the Honourable Minister of Finance, Economic Development and Investment Promotion (Mthuli Ncube) and he has agreed to standardise the rates because it was beginning to create a situation where there is an implied rate for ZiG arising out of the tax differentials.
“So, that is going to be standardised by the minister very soon,” Dr Mushayavanhu revealed, but without being specific on whether this would entail whittling down the IMTT for ZiG or increasing the one for other foreign currencies.
Captains of industry last week, however, said the IMTT was the major reason several registered operators use exchange rates that are higher than the official interbank rate.
Most retailers and businesses use an exchange rate of between ZiG17 and ZiG20 when pricing goods and services, leading to suggestions they are using parallel indexed rates.
Industry players said the IMTT was a hidden cost, which businesses needed to account for by factoring the final price on consumers.
“IMTT is a transaction tax charged on electronic payments. The tax is 2 percent for all local currency taxes and 1 percent for US dollar electronic transactions,” said an industry player who spoke on condition of anonymity.
“It’s illegal to refuse payment in approved currency, but since IMTT is a cost, what businesses do is that they simply pass on the cost to the consumers.”
This makes the cost of goods and services, as well as exchange rates used by registered traders, higher than those used by informal sector traders.
This is because registered operators incur IMTT-related costs plus value-added tax, which they must account for in the price of goods and services charged to consumers, making them less competitive compared to unregistered traders, who also deal exclusively in foreign currency cash.
Online Reporter