FINANCE , Economic Development and Investment Promotion minister Mthuli Ncube yesterday ignored industry’s calls to reduce or make the intermediated money transfer tax (IMTT) deductible for business.
During mid-term budget review consultations, individuals and industry bodies, including banks, lobbied for the 2% IMTT introduced about six years ago to be reduced.
The Bankers Association of Zimbabwe (BAZ) argued that IMTT was driving the economy further into informality, with most transactions taking place outside the formal system. They argued that the bulk of transactions had shifted to the informal market as businesses tried to avoid taxation, leading to revenue losses.
This view was shared by the Zimbabwe National Chamber of Commerce and the Confederation of Zimbabwe Retailers.
But presenting the 2024 mid-term budget review yesterday, Ncube ignored the calls.
He only said: “Honourable members would be aware that the government, in May 2024 aligned rates of intermediated money transfer tax on local currency transfers, foreign and outbound transactions, as well as the Zimbabwe gold backed digital token.
“This measure is intended to eliminate preferential treatment on specified transactions. I, therefore, propose to regularise the amendment in line with the provisions of Section 3 of the Finance Act (Cap.23.04).”
BAZ had suggested that IMTT should be allowed as a deductible tax expense for entities up to date with corporate and personal income tax.
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It had also proposed adjusting the USD flat rate charge applicable to the maximum threshold given the 2% IMTT rate change.
Currently, the flat charge is US$10 150 for transactions above US$500 000, yet 2% of US$500 000 is US$10 000, punishing high-value transactions.
Ncube proposed to provide reprieve through waiver of the Special Surtax on Beverages Sugar Content due for the period January 1, 2024 to February 8, 2024.
The government adjusted the Special Surtax on Beverage Sugar Content from US$0,002 per gramme to US$0,001/g, with effect from February 9, 2024, in response to representations from the productive sector.
Whereas some of the manufacturers complied with the legislation subsisting in January 2024, Ncube noted that a number of operators could not honour their tax obligations, resulting in unsustainable tax debts.
Operators, who had already honoured their tax obligations at US$0,002/g, will be availed with the option of having their accounts credited against future tax obligations.
In order to encourage formal trade of meat products, Ncube proposed to exempt live cattle, pigs, goats, sheep and bovine semen from value-added tax (VAT).
He also proposed that the bonus tax-free threshold be adjusted to US$700 or the local currency equivalent thereof at the time of remuneration. Ncube proposed that retailers should be allowed to purchase directly from manufacturers, provided they present a valid tax clearance certificate and proof of VAT registration.
Additionally, he suggested that manufacturers be permitted to sell directly to institutions such as hotels, schools, and other corporate entities, provided these operators are registered for VAT and hold a valid tax clearance certificate.
“In order to protect the quality of goods and safety of consumers, perishable products such as bread, milk and milk products, will be distributed by manufacturers directly to retailers,” he said.
