‘Scrap 2% tax’

CAPTAINS of industry and commerce yesterday asked Treasury to scrap or lower the controversial 2% intermediated money transfer tax (IMTT) imposed last year by Finance minister Mthuli Ncube, saying it was an unsustainable additional cost to their already struggling companies.

BY VENERANDA LANGA

The call came as various bodies representing industry and commerce appeared before the Felix Mhona-chaired Budget and Finance Portfolio Committee as part of the 2020 budget consultations.

The industrialists also urged government to stop funding the Command Agriculture programme because it was fuelling broad money supply and driving the economy into hyperinflation.

The US$2,8 billion that government used to support Command Agriculture has since been deemed as unauthorised expenditure after it was allocated without Parliament approval.

Ncube is yet to come before Parliament for condonation.

Command Agriculture has all along been supported by government through issuance of Treasury Bills (TBs), which is basically printing of money that government does not have.

Between 2017 and 2018, around US$2,8 billion was issued to Sakunda Holdings, owned by Kudakwashe Tagwirei to spearhead the Command Agriculture programme.

“The impact of the Command Agriculture programme has been to crowd out activities in the market, and we think that the Presidential Input Scheme should be the one funded through the budget,” Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Christopher Mugaga said.

“Command Agriculture should be a specialised activity funded by banks. It is non-performing loans and at the end government incurred an expenditure and so Command Agriculture must not be on the budget figures,” Mugaga said.

Turning to the 2% tax, Mugaga said it has been a serious expenditure and so Command Agriculture must not be on the budget figures,” Mugaga said.

Turning to the 2% tax, Mugaga said it has been a serious cost to business.

“Running a budget surplus on the 2% transaction tax has always been high for us as business and we need to engage Zimra (Zimbabwe Revenue Authority) and the Finance ministry so that they either remove it or reduce it to 1% because of its cost to business. If I send money to my mother today, it is taxed and it is too much. The 2% (tax) is a major cost to business and you cannot celebrate a budget surplus driven by this when business is being lost through it and there is no cost benefit to it,” Mugaga said.

ZNCC president Tamuka Macheka weighed in, saying the major problem in Zimbabwe was that the policy environment was very unfriendly.

“The policy environment is so unfriendly that the 2020 budget submissions will not be efficient as long as the policies are unfriendly and inconsistent,” he said.
Bankers’ Association of Zimbabwe president Webster Rusere said there was need to give time for implementation of newly-announced policies. For example, he said, when the 2% tax was announced, bankers were not given time to factor in system changes to implement it, which then led to confusion.
But Zimra Commissioner-General Faith Mazani told the committee that her organisation was in favour of the 2% tax.
“Last year, the ministry introduced the 2% transaction tax and I know that it is tax that has received negative publicity. But I want to explain that the major setback on revenue is that tax compliance is very low. There was a big fiscal deficit and so the 2% tax covered that gap, while we are building up capacity and encouraging companies to pay taxes,” Mazani said.
Commenting on talk currently doing the rounds that a new currency might be printed, Rusere said: “Now people are asking when a new currency is coming, but it was announced that we are using the Zimbabwean dollar already and so what is the new currency. Whether we print new notes with a different face and coins and say it is the new currency – what we need to be clear about to the people is that when we talk about a new currency, we need to stabilise the Zimbabwean dollar by coming up with good monetary policies.”

Confederation of Zimbabwe Industries’ Henry Ruzvidzo said while the 2% tax was meant to include previous non-taxpayers, it was severely affecting industries in that it is double taxation. He said if the tax was beneficial, then its gains must be seen through infrastructural growth.
“We appreciate that tax bands were recently reviewed to $700, but we believe the level is not sufficient enough to encourage spending. We are finding challenges of movement of our products and propose that the tax bands need to be reviewed upwards,” Ruzvidzo said.

The High Court recently rules that the 2% tax was illegal, but the court verdict morphed into an academic exercise as government has now enacted enabling legislation to support it.
Chamber of Mines chief executive officer Isaac Kwesi also painted a gloomy picture in the mining sector, saying the macro-economic challenges facing the nation had not spared the sector, especially electricity and water challenges, resulting in a decline in mining output from 10% to 45% in August compared to the same period last year.

The Zimbabwe Council of Churches also gave oral evidence on the economic challenges that the ordinary people were experiencing as a result of the economic meltdown.

11 Comments

  1. The Presidential Inputs Scheme must be abolished together with Command Agriculture, if the President wants it to continue he must personally fund it. If it is by the fiscus then a name change to reflect that tax-payer’s monies are being utilised is necessary right now the rural folk are being misinformed that the inputs are coming from the President. The entire tax/levies regime of the country needs to be revised as it is currently benefiting more than the business that’s are very unsustainable and prohibitive situation.

  2. 2% tax is fine as it’s all inclusive. What should be done is that other taxes/ expenses for businesses and those employed should be cut

    1. And what about those that are paying PAYE and corporates already taxed? An what about the multiple taxation of funds that are transferred to a relative 2% and when that relative uses the funds another 2%? Daylight robbery and another burden to fund high living officials

  3. Corruption is also a far worse drain on fiscus than command agriculture etc

    1. Command agric is nothing but a nefarious scheme to siphon monies from the fiscus its daylight robbery corruption of the highest order. Military term is used deliberately to instill fear to whoever wants to probe and so is Presidential Inputs thank God Biti and his Parly Comm are not cowed sofar one head has rolled – Accountant Gen in the ministry of finance.

  4. So the general populace must suffer because Zimra isn’t doing it’s collection job? Why must we be punished for using electronic payments like there is another option? That’s why Gov is not putting more cash into the system. So we can all fund “the budget surplus” If there is such a thing, why issue TBs? Use that surplus for the people since the demonic 2% tax is being levied on the people.

  5. Anti Corruption

    Why is there so much noise about a miniscule 2%

    1. A miniscule 2% for those with little is a huge amount. Have a heart for those less fotunate.

    2. It triggered the hyper inflationary state that we are in today!!

  6. Food production the world over is subsidised by the State.
    Presidential input scheme barring politics aside ensures that there is food security.
    Command Agriculture in the face of non existant commercial bank loans is the solution to finance the beneficiaries with inputs, implements and other requirements that are needed for successful farming.
    BUT what needs to be developed given the experiences of the past, is to now identify serious and dedicated farmers based on their past performance, eradicate corruptive tendencies that have been used to shortage the system and bring accountability perhaps via parliament on disbursement of the funds. The programme is quite noble but its the system that needs policing and clean up.

  7. matebele warrior

    The comment by the zimra official bears that the government has failed

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