THE insurance sector has called on Finance minister Mthuli Ncube to exempt insurance companies from paying the 2% Intermediated Money Transfer Tax (IMMT) when paying out claims in the upcoming 2023 National Budget to be presented on November 24 2022.
Under the IMMT, two cents per dollar tax is added to transactions between ZWL$10 and ZWL$500 000 in order to hike revenues and lower government borrowing, specifically via the issuance of Treasury Bills and a Reserve Bank of Zimbabwe (RBZ) overdraft facility. The tax was introduced in October 2018, shortly after Ncube’s appointment as the Treasury boss.
The controversial tax has been widely condemned as an extra burden on the country’s citizens already struggling to make ends meet in an economy ravaged by three digit inflation figures of 268,8%.
In an interview with businessdigest, Old Mutual managing director Gloria Zvaravanhu pointed out that the removal of the tax on payout claims will help strengthen the insurance pool.
“As the insurance industry, we have been fortunate that the realisation has always been there for us that when someone is paying their insurance premiums they are not subject to that IMTT.
“What we would want as an industry is to say that when we also pay the claim, because we are paying out of a pool of savings, we would also want that exemption to come through from that side,” she said.
“So from a premium’s point of view, when someone is remitting their premium, they don’t get a deduction of that but on the claim side, when we pay out we have to incur that IMTT which we believe if removed can help strengthen that insurance pool,” Zvaravanhu added.
Business member organisations such as the Zimbabwe National Chamber of Commerce, Employers’ Confederation of Zimbabwe, Confederation of Zimbabwe Industries as well as the Zimbabwe Farmers Union have all called for the tax to be scrapped.
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Zvaravanhu said the industry is calling upon the treasury to put in place policies that will increase disposable incomes for citizens to enable them to buy insurance products.
“As an insurance industry, our interest is always to make sure that we up the level of insurance penetration. Whatever initiatives will help the insurance public to afford the product, and easy access are things that we will embrace as an industry. We need to find a way to get our insurance penetration levels up,” she said.
Zvaravanhu added that insurers are savings mobilisers and the mobilised savings can be used for national projects in return boosting the economy. Government insiders said the 2023 budget will be presented first to the Cabinet Committee on Financial and Economic Affairs on November 10 2022, before its presentation to the full Cabinet on November 15 2022.