Finance and Economic Development Minister, Mthuli Ncube, last night announced changes to the Intemediated Money Transfer Tax of two cents per dollar transacted by setting upper limits and lower limits.
The tax review which comes into effect on the date of gazette of the relevant regulations will apply to most electronic transactions while a few will be exempt.
In a statement released last night Minister Ncube said as part of the new changes, transactions below $10 will no longer attract the two cents tax, while all transactions above $10 up to $500 000 will have to comply with the new tax regime.
However, all transactions above $500 000 will attract a flat tax of $10 000. Further the tax will not apply to eight types of transactions, namely inter company transfer of funds, including transfers of intermediary accounts, transfer of funds on sale and purchase of equities, transfer of funds on purchase and redemption of money marker instruments, transfer of funds for payment of salaries, and for payment of taxes. It will also not apply to transfer of funds to intermediary accounts (eg conveyancers), transfer of funds in respect of foreign currency related payments as well as transfer of funds by Government.
Minister Ncube said Government had used an evidence-based policymaking approach, where one announces a policy first then fine tunes it taking into consideration reactions and recommendations from key stakeholders.
Previously, electronic transfers attracted a flat five cents per transaction, which was seen as regressive to the poor who would pay an effective five percent per dollar, while the well-to-do would pay five cents for transactions of hundreds of dollars.
The new policy, Minister Ncube said, is progressive as it reduced the tax liability from low value transactions most of which are conducted by the under privileged. Transactions below $10 which used to attract a five cent tax are no longer paying anything.
According to treasury and monetary bosses, the previous taxation system was in a way regressive in that for every transaction, regardless of whether it was big or small, the public had to part away with a significant amount of five cents.
However, following the announcement of the fiscal measures on Monday, social media was awash with claims that no revenue proposals can become law without a Finance Act approved by Parliament and that the new measures are null and void.
Minister Ncube, however, told our Harare Bureau that he was well aware of the requirements of the law and will soon gazette the new measures.
Without giving the exact date of the promulgation, Minister Ncube said: “We have to put in a statutory instrument, that’s fine, that’s normal, we need an SI, tichaita (we will do it).”
In announcing the two cents tax, Minister Ncube directed financial institutions, banks and the Zimbabwe Revenue Authority (Zimra), working together with telecommunication companies to extend the collection to all electronic financial transactions effective 1 October 2018, even before the SI has been gazetted.
According to a survey conducted by our Harare Bureau, telecommunication players have since complied with this directive although the SI has not yet been gazetted.
Minister Ncube said there was still time to fine tune before gazetting.
“You know what is called evidence-based policymaking, which sometimes unoita (you come up with a) policy, then woona (you see) reaction then you adjust, wavane (when you now have) even more evidence,” he said.
“You can never have all the evidence before your Act. That’s what is called evidence-based policy making. We shall fine tune, there is no problem.”
Earlier on during the presentation of the TSP, Minister Ncube defended the two cents tax measure saying it was necessary as “we need to stop the bleeding.”
The country is faced with a myriad of economic challenges including a ballooning budget deficit, a huge trade deficit and crippling foreign currency shortages.
“We cannot do this without pain, my view is that we take the pain at the beginning, in the first year or two, after that we stabilise our macro-economy so that we take the pain together as a nation.”
Minister Ncube said most people do not realise they are already feeling the pain given the current economic situation and all Government is doing is fixing the economy through sacrifices.
He said measures that were effective before in broadening the tax base are no longer effective hence new measures have to be introduced as has been done now.
He, however, said there is need to fine-tune Monday’s measures and probably put a cap at the higher end, “but this is really one way where together as a nation we can fix our problems and we need all hands of the deck to do that.”
Minister Ncube said the new measures have been implemented in other parts of the world, with one country charging as much as 15 percent. He said what was needed is for Government to be accountable on the funds and have tangible outcomes that justify the revenue collection.
Newly appointed permanent secretary in the Ministry of Finance and Economic Development, George Guvamatanga, also spoke on the need for accountability and transparent use of the money collected through the two cents tax. He said it was Government’s intention to ring-fence a certain portion of that money, which will be directed to social services within the marginalised areas, focusing mostly on health and education.
“We will expand to other areas as part of our responsibility as Government, but I think as soon as we start collecting the funds, you will see roads, and I am saying it and you can quote me, you will see roads in Mabvuku, roads in Kuwadzana being fixed and of course, roads in Kambuzuma being fixed.”
“This is a commitment that we are making, we are not just going to collect this money so that it goes into travel and subsistent here at Government, so that it goes into purchasing vehicles here in Government.”