HIGH taxes being piled on companies came under the spotlight this week, with the country’s biggest business lobbies slamming the state for clinging on to a regime that has “destroyed” enterprise.
In papers submitted to Finance minister Mthuli Ncube ahead of the 2025 National Budget, which is expected in a few weeks’ time, the Zimbabwe National Chamber of Commerce (ZNCC), the Bankers’ Association of Zimbabwe (BAZ) and the Confederation of Zimbabwe Retailers (CZR) called for complete reviews of the current taxation regime to relieve companies from pressures emanating from a tough business climate.
At the centre of these taxes was the intermediated money transfer tax (IMTT), which the ZNCC said must be removed.
Government introduced IMTT about six years ago, hoping to bolster faltering revenues as de-industrialisation escalated, affecting corporate tax.
Other major tax heads like Pay-as-You-Earn have been affected by job losses.
Taxed at 2%, IMTT taps from electronic transactions, but it has been the subject of rebuke since its introduction, with some industrialists saying it was a form of double taxation.
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This week, the ZNCC said State revenues from IMTT were plummeting as markets found ways of avoiding the tax.
“Our position is that the IMMT is destructive as it is working against the government’s thrust to promote the use of electronic means … it should be removed entirely,” ZNCC said.
“The goals of the financial inclusion initiatives will not be reached with the IMTT in force. The IMTT was reported to have contributed about 3,4% to total revenue in the first half of the year.
“Comparatively, IMTT contributed about 8% to total revenue during the same period in 2022 and about 6,7% between January and June 2023. The IMTT, coupled with other taxes charged on bank transactions such as withdrawal levies, force people to transact in hard cash, thereby reducing the amount of tax collected via such means.
“The IMTT has an incremental effect on the cost build-up of players in the supply chain, from the producer to the wholesaler, to the retailer, and to the final consumer. Adding Vat (value added tax), the tax collected per transaction will be about 17%.”
Zimbabwe is rated as one of the most heavily taxed economies, and among the most expensive for doing business.
In January, the Confederation of Zimbabwe Industries (CZI) gave chilling details of how controversial taxes introduced in the 2024 budget could trigger the collapse of 35 000 small-scale firms.
CZI warned that Zimbabwe’s biggest industries would not survive in the impending crisis, which it predicted would trigger the retrenchment of up to 38 000 workers in only a few sectors.
This week, BAZ said in its submission to Ncube that he must reduce IMTT on transactions.
BAZ argued that the 2% tax had led to increased disintermediation, as it discouraged formal channels.
This had resulted in increased revenue leakages, as informal establishments tended not to register for tax obligations.
It said IMTT had ratcheted the cost of doing business, discouraging informal entities from formalising their operations.
“Export competitiveness is also affected negatively due to the increased cost of production, and this reduces the country’s capacity to earn forex and improve the balance of trade. If IMTT is reduced, volumes and values of transactions through formal channels will increase, thereby widening the tax base,” BAZ said.
“Effectively, tax revenue will increase. Increased cash transactions are exposing cash handlers to robberies, some of which have resulted in loss of life.”