FINANCE and Economic Development Minister Professor Mthuli Ncube says the Government will review the intermediated money transfer tax (IMTT), commonly known as two percent tax, but this will not happen in the short to medium term.
Businesses want the IMTT to be made tax deductible, arguing it has become a significant and additional cost to business operations.
Professor Ncube told businesses, economists and stakeholders at a post 2022 National Budget breakfast meeting hosted by ZTN and Business Weekly that Government was cognisant of business concerns over the tax, and will look into reviewing it as per industry requests.
However, he said the review will not come immediately as the Government still has a lot of projects and programmes that require funding and the tax head was one of the major sources of revenue.
“It is still too early to make adjustments on the IMTT, we still have a lot that needs to be done at the moment. But we will look into it because we are a listening Government,” said Prof Ncube.
The IMTT was introduced in 2019 to capture the informal sector that ordinarily did not pay any taxes despite making up a huge chunk of local transactions, now accounting for nearly half the contribution of corporate tax — the biggest revenue head.
In his 2022 National Budget, Professor Ncube indicated that revenues from the IMTT tax rose to $28,9 billion for the nine months to September 2021 against a target of $22,7 billion.
However, the IMTT, which was introduced to capture the informal sector that ordinarily did not pay any taxes despite accounting for a huge chunk of local transactions, now accounts for nearly half the contribution of corporate tax — Zimbabwe’s second biggest revenue head, after value added tax. The IMTT is part of other indirect taxes that contributed 11,1 percent to total collections.
Businesses feel the two percent tax is more taxing to their operations and have called on the Treasury to review it.
Confederation of Zimbabwe Industries (CZI) economist Victor Bhoroma said this was worsening the cost burden for businesses, now forced to pay the tax for every transaction they make, even for internal transactions.
“We would want this to be tax-deductible, like other taxes,” he said.
Minister Ncube further highlighted that the Government was content with the present setup where firms are remitting their taxes in the currency of trade, indicating that the Government was also in dire need of the US dollars given some of the ongoing developmental and infrastructure projects.
Minister Ncube also noted that the Government had started paying contractors involved in roads, dams, and other infrastructure projects using US dollars in the past two months.
“We cannot have a situation where only the Government is paid in Zimbabwe dollars when everyone else wants to be paid in US dollars and yet we need the US dollars as well,” he said.
“Last month and the month before we paid contractors in hard US dollars, that was the only way they could move faster and also that was the only way they could cushion themselves against the rising inflation.”