eBusiness Weekly
Tawanda Musarurwa
Individuals and households should consider various investment vehicles to shield themselves from a possible increase in taxation after Treasury this week moved to review the Intermediated Money Transfer Tax from 5 cents per transaction to 2 cents per dollar transacted, says Akribos Research Services.
Although the review of tax on electronic transactions from US0,05c per transaction to US0,02c per dollar transacted will help boost Government coffers going forward, there are genuine concerns about the impact the move will have on households and individuals.
Analysts at Akribos Research Services say that the move will increase the cost of transacting, particularly for big-ticket transactions.
The new US0,02c per dollar tax effectively means most Zimbabweans will have to fork out more in tax for every dollar transacted as over 90 percent of the transactions currently conducted in the country are electronic. There is also a concern that the prices of basic commodities have shown an upward trend on the back of this development.
Confederation of Zimbabwe Retailers (CZR) president Den ford Mutate, is on record saying that suppliers and manufacturers had begun sending notices to retailers effecting price increases of up to 10 percent, on the back of the new tax rate.
“A common feature when one looks into how Zimbabwe households allocate their income on a monthly basis is that a large proportion of household income is being directed towards housing costs (mortgage/rent/rates), living expenses (groceries), debt (loans) and transport (petrol, motor vehicles or bus fare).
“Ideally, a healthy budget should allocate about 35 percent of household income towards housing costs (mortgage/rent/rates), living expenses 25 percent, transport 15 percent, savings 15 percent and debt 10 percent.
“Our view is that households and individuals will need to consider various investment vehicles so as to preserve value and also build discretionary wealth,” said Akribos.
“Given the outcry from different sectors of the economy, it appears the policy was announced without proper consultation of stakeholders.
“This brings to mind a situation in February 2017, when the then Minister of Finance Patrick Chinamasa announced a 15 percent value added tax (VAT) on basic commodities (meant in our view, as an internal devaluation strategy, rather than for widening of tax base). The policy was later reversed, after public backlash, with the government citing the need for further consultations. The new tax plan might need to be reviewed.”
While announcing a number of fiscal measures to reversing fiscal dis-equilibrium on Monday, Finance and Economic Development Minister Professor Thule Cube said: “Treasury introduced the Intermediated Money Transfer Tax with effect from January 1, 2003 through the Finance Act 15 of 2002.
“The tax was set at 5 cents per transaction, which was a specific tax. However, 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 . . . I hereby review the Intermediated Money Transfer Tax from 5 cents per transaction to 2 cents per dollar transacted, effective October 1, 2018.”
