FINANCE and Economic Development minister Mthuli Ncube yesterday piled more misery on the transacting public by introducing a 2% intermediated tax on foreign currency electronic transactions with effect from August 1, a month after government employees were awarded a monthly US$75 COVID-19 allowance.
BY VENERANDA LANGA
In his 2020 mid-term budget and economic review statement yesterday, Ncube extended the intermediated money transfer tax which will see the introduction of a 2% tax on foreign currency electronic transactions.
The new tax regime followed government’s decision to legalise use of the US$ and awarding of its workers a monthly US$75 COVID-19 allowance, to be deposited in their foreign currency accounts. The money will be utilised through electronic transactions.
“Following the legalised use of foreign currency in domestic trade, there has been an upsurge in electronic transfers of foreign currency for transaction purposes,” Ncube said.
“The current exemption has, thus, created an unfair advantage for taxpayers transacting in foreign currency, thereby raising equity considerations.”
He added: “I, therefore, propose to extend intermediated money transfer tax to cover foreign currency transactions, with effect from August 1, 2020.
“In addition, I propose to exempt from tax foreign currency transactions not exceeding US$5. I propose to review the tax-free threshold for local currency transactions from $100 to $300.”
For corporates, he said the maximum tax payable per transaction would be reviewed from $25 000 to $50 000 on transactions with values exceeding $2,5 million.
“Accordingly, a maximum tax of US$2 000 is proposed for foreign currency transactions with a value exceeding US$100 000 with effect August 1, 2020,” Ncube said, a figure that translates to about 2% tax.
There was uproar when government introduced a 2% transaction tax in October 2018, which President Emmerson Mnangagwa supported despite an outcry.
Ncube has boasted the new tax regime forced the country, for the first time in decades, to record a budget surplus.
Ordinary Zimbabweans have been suffering from the 2% intermediated money transfer tax on every electronic transaction, which has severely eroded their purchasing power.
Current legislation exempts the transfer of money into and from nostro foreign currency accounts from intermediated money transfer tax.
Following the legalised use of foreign currency in domestic trade, there has been an upsurge in electronic transfers of foreign currency for transaction purposes.
“Furthermore, the preference for foreign currency by most business has undermined the revenue generating capacity of the tax,” Ncube said.
Ncube said transactions for organisations accredited in terms of the Privileges and Immunities Act (Chapter 3:03) would remain exempt from tax.