The government of Zimbabwe is set to go ahead with the controversial electronic 2% tax amid reports that there is potential to raise about $3,4 billion annually, which will finance government expenditure and widen room for capital funding and retooling of the manufacturing sector, a tax expert has said.
Last Friday, Finance and Economic Development Minister Professor Ncube announced upper and lower limits for the Intermediary Money Transfer Tax, as part of the broader fiscal stabilisation measures.
Under the new framework, transactions below $10 will no longer attract the two cents tax, while all transactions above $10 to $500 000 will comply with the new tax regime.
Bulawayo-based tax expert Mr Peter Mgodi, told delegates at the Zimbabwe National Chamber of Commerce (ZNCC) Matabeleland region 2018 mid-term monetary policy statement review on Tuesday that the Intermediary Money Transfer Tax was a quick fix to the economy.
Based on last year’s total transactions of 1,7 billion, Mr Mgodi hinted that chances were high that the country will achieve that figure or even higher.
“The problem now is that this is now an ad valorem tax (a tax whose amount is based on the value of a transaction).
“The assumption is that others will be transferring $20 others will be transferring thousands of dollars while others will be transferring millions. And when we average the transactions and come to $100, it means we will make $2 per transactions and not five cents and therefore the minister’s projection will be $3,4 billion,” he said
Mr Mgodi said in 2017, the Zimbabwe Revenue Authority (Zimra) total revenue collections were within the $3,4 billion range.
“Given Zimbabwe’s budget deficit . . . as a Finance Minister raising $3,4 billion in two years or even three years is brilliant. This is a transitional policy and a quick fix to try to get us to the dry ground,” he said.
President Mnangagwa has said the tax, which the Government has announced was not designed to hurt the ordinary people and companies, but to help the manufacturing sector to get funds for retooling and modernisation as the economy gears to ramp up production.
Mr Mgodi said premised on the prevailing economic climate, what business will do is to wait and see whether they are operating as announced by Government.
“And when people are happy, then we will see more confidence with those bringing in foreign currency trying to source more.
“But it will only depend on what they see happening on the ground. The problem in Zimbabwe is that we have no confidence in our Government. So, even now with the new Minister of Finance (Prof Mthuli Ncube) people still want to see whether he is not under the influence of the paymasters. So, all these things will be consolidated by the confidence in the country,” he said.