THE transfer of funds from mobile money transfer agents to recipients will now be subjected to taxation as Treasury moves to plug out rampant illegal foreign currency deals being conducted via the cash-in and cash-out facility.
Although Government has established the interbank foreign currency market to stabilise the financial services sector, illegal foreign currency deals remain stubborn with the parallel market still exerting pressure on the formal trading platform.
In his 2019 mid-year budget review statement presented in Parliament on Thursday, Finance and Economic Development Minister Professor Mthuli Ncube tracked the remnant illegal forex deals to the abuse of the cash-in and cash-out facility.
He said while legislation obliges financial institutions to deduct intermediated money transfer tax on the transfer of money by any means other than by cheque, mobile money transfers by agents to recipients were left out of the tax bracket. The existing regulations apply to taxation on money transfers between two persons, from one person to two or more persons or from two or more persons to one person.
“However, cash-in and cash-out transactions conducted through mobile money transfer platforms do not fall within the above criterion hence the tax is not deductible,” said Prof Ncube.
He said most illegal foreign currency transactions were being conducted through this platform thereby evading payment of tax and sustaining parallel market activities.
“I, therefore, propose to levy tax on the transfer of money from mobile money transfer agents to recipients,” said Minister Ncube.
Government introduced the intermediated money transfer tax (IMTT), popularly known as the ‘2c tax’ in October last year. The tax is pegged at 2c per every dollar transacted as part of measures to widen the revenue base. It replaced the previous tax of five cents per transaction.
Prof Ncube said the bulk of the revenue from this tax head was being used to finance critical infrastructure projects such as roads. Since its introduction, the tax head has performed very well and has become one of the top revenue head contributors, according to Zimra.
In his budget review statement, Prof Ncube announced a further review to the IMTT citing changes in the macro-economic conditions.
“I propose to review the tax-free threshold from the current ZWL$10 to ZW$20 and the maximum tax payable per transaction by corporates from the current ZWL$10 000 to ZW$15 000 for transactions with value exceeding ZWL$750 000. Furthermore, I propose to exempt additional transactions from IMTT in order to eliminate double taxation,” he said.
Individual tax payers and corporates have complained that the 2c tax has increased the cost of doing business and is draining consumers.
Prof Ncube has said the revenue enhancing measures are meant to boost domestic resources to support the Transitional Stabilisation Programme (TSP), a major building block towards attainment of an upper middle income economy by 2030.
“It is therefore time to really focus on production, productivity, growth, poverty reduction and development, given that the fiscal and monetary policy issues are under control,” said Prof Ncube.