TREASURY has proposed further exemptions to the Intermediated Money Transfer Tax of two cents per dollar transacted following widespread stakeholder concerns and the need to ease cost of doing business while consolidating gains achieved through use of electronic transacting platforms.
Transfer of funds between an individual’s mobile wallets and or bank accounts as well as claims settlements to medical service providers from medical aid societies will be exempted from the new tax with effect from 1 January 2019.
Further exemptions cover transfer of insurance premiums by brokers to insurance companies and subsequent transfers to re-insurers, asset managers and retro cessionaries.
Also included in the bracket are transfers of funds from mobile money trust funds for the purchase of electricity and transfer of funds to mining houses by the Minerals and Marketing Corporation of Zimbabwe (MMCZ).
This brings to 13 the exemptions under the new tax.
The latest changes are contained in the 2019 National Budget Statement as a response to individual tax payers and corporates who had cried foul over the new tax when it was introduced in October.
Captains of industry and mining executives had pleaded with Government to reverse or fine-tune the terms of the tax citing increased burden and its effect on doing business.
Initially, Finance Minister Professor Mthuli Ncube had responded by setting an upper limit of $500 000 and lower limit of $10 but still businesses complained until Government pledged to further consider their input. According to Treasury, all transactions above $500 000 attract a flat tax of $10 000.
In presenting the 2019 national budget, Prof Ncube said the two cents tax per dollar transaction, which was reviewed from the five cents per transaction, was a critical revenue stream for the economy, especially considering the need to finance inescapable expenditures without recourse to debt creating instruments such as Treasury Bills.
He said Government took the opportunity of the national budget consultations to solicit for views on adjustments that can be made to the tax so that it does not inhibit financial intermediation, investment and payment of taxes, among others.
“The tax is ideal as a potential source of revenue that spreads the burden across the generality of the transacting public, including those in the informal sector, whose contribution to the fiscus remains minimal,” said Prof Ncube.
From the initial schedule, the tax already exempts 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 market instruments, transfer of funds for payment of salaries, and for payment of taxes.
It also exempts transfer of funds to intermediary accounts such as conveyancers, transfer of funds in respect of foreign currency related payments as well as transfer of funds by Government.
Prof Ncube has said Government used an evidence-based policy-making 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.