Ncube gives in to pressure, revises 2 cents levy on electronic transfers
FINANCE minister Mthuli Ncube gave in to pressure Friday and announced a cap and some exemptions on the 2 percent electronic transfers tax he imposed earlier this week to widespread outrage across the country.
Critics warned that the tax would lead to increases in the prices of basic commodities and hit the majority poor the hardest.
Top economist and government adviser Prof Ashok Chakravarti said the measure had not been properly thought through.
He warned that companies would simply pass the additional tax burden onto consumers.
For instance, Prof Chakravarti said, a fuel dealer buying product for $100 million and suddenly needing to pay $2 million in additional tax would simply increase the price of the product.
In a statement late Friday, Prof Ncube said the tax would now be capped at $10,000 while transactions below $10 would be exempt.
“The 2 cents per dollar tax will apply will apply on transactions of $10 and above only,” the minister said.
“Transactions below $10 will be exempt from this tax. There is a cap of $10,000 on the amount to be paid. This implies that transactions above $500,000 will attract a flat tax of $10,000.”
The new levy was aimed at raising funds to address a problematic budget deficit of around $2 billion at a time the government was struggling to tax a highly informalized economy.
“ … due to the increase in informalisation of the economy and huge increase in electronic and mobile phone based financial transactions and RTGS transactions there is need to expand the tax collection base and ensure that the tax collection points are aligned with electronic mobile payment transactions and RTGS system,” Prof Ncube said when introducing the tax.
“I hereby review the Intermediated Money Transfer Tax from 5 cents per transaction to 2 cents per dollar transacted, effective 1 October 2018.
“I am therefore directing financial institutions, banks and ZIMRA, working together with telecommunication companies to extend the collection to all electronic financial transactions.”
The main opposition MDC party condemned the decision, accusing the government of robbing the poor to fund lavish lifestyles of the elite.
The party described the tax as “day light robbery and an encouragement for creative transactions which will fuel black market”.
“ … this is a war being declared on a particular class of Zimbabwe, the working people,” the party added.
Meanwhile, in his review Friday, the finance minister announced a number of transactions which will be completely exempt from the two percent tax.
These transactions include intra-company transfers, funds for the payment of salaries, as well as transfers for the payment of tax.