BY MTHANDAZO NYONI THE Zimbabwe National Chamber of Commerce (ZNCC) has called for a review of the intermediated money transfer tax (IMMT) on foreign currency transfers from 4% to 2%, arguing that the current tax regime has pushed up costs of production.
In a bid to stabilise the economy, reduce inflation and shore up the Zimbabwe dollar, the government in May this year announced a cocktail of measures including doubling of IMMT on transfer of foreign currency from 2% to 4%.
The levy on withdrawals of foreign currency was increased from 5 cents per transaction to 2% of the amount withdrawn.
But during a pre-national budget consultation held in Harare recently, ZNCC members said the current tax regime was retrogressive.
“There is a proposal for a review of the intermediated money transfer tax from a rate of 4% to 2% for foreign currency transactions because if someone is transferring US$1 000, they will pay 4%. If someone is transferring an equivalent amount of US$1 000 in RTGS, their burden will be 2%,” said Tapiwa Gumbo, who spoke on behalf of the group which focused on the topic Revenue and Tax Relief Measures.
“So, if you are paying 4% you are being punished for transferring in United States dollars, while for a person who is transferring the equivalent amount in local currency the burden is 100% lower.
“So there is a need to level the playing field,” he said.
Gumbo said the application of the tax was not equitable.
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“Here we are talking about the application to say other business expenses are deductible when you do your income tax.
You can deduct certain expenses like wages and other expenses but you can’t deduct this IMTT. The application on business is different from consumers because it becomes a production cost,” he said.
He encouraged the Zimbabwe Revenue Authority to be efficient when it comes to the issuance of tax clearance certificates, as delays were costing businesses.
“So if you are a compliant business in terms of taxation, you are remitting and submitting your files on time, but your tax clearance certificate has not been processed, what it means is if you are now transacting but you don’t have a tax clearance certificate no one will know that you are tax compliant until you have a certificate.”
“So the delay in the processing of this certificate makes you subject to 30% withholding tax on your gross receipts.
The proposal here is to put in place a mechanism for speeding up the processing of tax clearance certificates by the revenue authority and probably, the ideal period would be within two weeks,” he said.
ZNCC also said value-added tax should be paid based on the actual cash received by the business. The organisation advocated for forex allocation to all exporting industries to enable them to buy raw materials to produce the goods they export. The chamber also proposed protection for the agricultural sector as well as clothing and textile industries.
Zimbabwe, according to experts, has one of the highest mobile money transaction taxes in Africa, a development that is hurting millions of small business owners and low-income groups as the cost of living continued to rise.
The civic group Zimbabwe Coalition on Debt and Development recently said the increase in IMMT on domestic US dollar remittances from 2% to 4% exerted a disproportionately negative impact on the poor majority who have small foreign currency balances.
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