Auxilia Katongomara, Chronicle Reporter
CAPTAINS of industry and ordinary consumers yesterday implored Government to reconsider its new tax regime saying it will increase the cost of production and add more burden to citizens.
Announcing fiscal measures on Monday Finance and Economic Development Minister, Professor Mthuli Ncube, said the intermediated money transfer tax had been reviewed from five cents per transaction to two cents per dollar transacted, effective 1 October 2018. The decision has, however, led to a national outcry with business leaders and ordinary Zimbabweans saying the tax rate is too high as they were mostly utilising electronic transactions due to cash shortages.
Confederation of Zimbabwe Industries (CZI) president, Mr Sifelani Jabangwe, said the new tax regime would increase the cost of doing business.
“It will result in the increase in the cost of doing business if left in the current form. It’s good that it will help widen the tax base including the informal sector but the challenge is that if it left open ended it has adverse effects on the economy,” said Mr Jabangwe.
He said as business they were recommending Government to cap the tax rate to at least $2 per day so that the impact is minimal.
“Our recommendation is that it be made two percent with a cap, say with a maximum of $2, because what will happen for big businesses is that whenever we pay salaries we pay two percent more, whenever we pay for anything we pay two percent more. It will increase the cost to the value of that payment,” said Mr Jabangwe.
“It will be unsustainable. So, by capping it at $2 it will ensure the objective of tax collection but not at the expense of business.”
Industrialist and United Refineries Limited chief executive officer, Mr Busisa Moyo said the new tax regime will impact negatively on business and investors. “This will seriously hurt business. A business that makes US$1 million at five percent net margin (US$50 000.00) and pays US$2 million of creditors or does a total of the same in electronic transfers across its own accounts, EcoCash and to creditors in one month will pay US$40 000.00 in electronic transfer taxes, this leaves him with US$10 000.00 profit,” he argued.
“This is an 80 percent reduction in profits in this example. This will have dire consequences for business and investors.”
He said producers and retailers were most likely to pass this cost to consumers.
“I think it was an error or finger problem and should be have been 0.02 cents per dollar. I am sure it will be retracted or clarified soon. Zimbabwe is on emotive and sensitive economic ground at present, the context must be appreciated. This has cast a cloud on what could have been a fair Monetary Policy Statement that gets us started. This needs to be dispelled urgently,” said Mr Moyo.
There is also a feeling that the new tax regime could discourage people from using electronic money, while some suggested that Government should have consulted before announcing the new rate.
“There is a thought that this is a way of mopping up excess liquidity or deterring those who using RTGS for parallel market activities, but this will also hurt legitimate business and drive people away from electronic money, the very thing we are trying to encourage in a cashless republic. We have to reduce liquidity in a way that doesn’t increase costs of doing business and prices to the consumer,” said Mr Moyo.
Consumer Council of Zimbabwe (CCZ) executive director Ms Rosemary Siyachitema said they were still reviewing the monetary policy. Members of the public who spoke to The Chronicle also expressed dismay at the new tax and urged Government to review the decision. Some took to social media platforms to express their concerns. Mr Mthabisi Sibanda, an accountant said the two percent tax was very high considering that there is no cash circulating.
“I think this is too much. Maybe Government is trying to find a way to get people to bring cash back into circulation. We are using electronic money to pay Zesa, buy food, fuel among other things on a daily basis and for them to deduct two percent on all those transactions is not fair. We are already struggling without cash,” he said.
Ms Gladys Dube from Nketa 6 said the new tax would frustrate plastic money usage.
“When cash shortages started we were told to embrace plastic money but this is against the spirit of embracing it. We hardly access bond notes and serious taxation on the inflated electronic transactions doesn’t make our lives any better. It’s not that we are we are only going to make a single transaction a day,” said Ms Dube.