Finance and Economic Development minister Mthuli Ncube is getting submissions from a number of constituencies as he prepares the 2023 National Budget.
It has been a tradition that the Treasury gets submissions from interested constituencies—business member organisations and bids from the government ministries and departments. And in all cases the bids outstrip the total budget.
From submissions made so far, there is a common denominator—taxation—with business member organisations saying formal businesses are being over taxed.
They argue that the intermediated money transfer tax (IMTT) has become a transaction and not an income tax.
They want the IMTT to be tax deductible like all the transaction taxes since it applies to all transactions notwithstanding that some are done by formal businesses that pay taxes.
The Zimbabwe National Chamber of Commerce said businesses are incurring the IMTT even when paying tax dues to the Zimbabwe Revenue Authority making the IMTT a tax on tax. The Chamber wants Ncube to remove the IMTT on payments to ZIMRA.
It said the IMTT has a compounded effect on the supply chain due to the incremental tax charged from the producer to the consumer since this is passed on to the consumer in the form of price increases across all goods as a cushion to supply chain players against the increased cost of production.
Zimbabwe’s biggest industrialists body, the Confederation of Zimbabwe Industries said the introduction of IMTT on US$ transactions at a rate of 4% is “very punitive” to the formal sector and is also threatening the depositing of US$ into the financial systems as firms try to avoid losing 4% of the value whenever they transact.
ZNCC said the tax on forex transactions has the unintended consequence of compelling formal businesses to accept hard cash only and operate through informal channels, which is outside the confines of the laws of the land.
We reported last week that banks are wary of the 4% IMTT on foreign transactions saying it has forced depositors to shun the financial institutions. Banks rely on depositors to be able to lend.
This is not the first time that there has been an outcry over the IMTT. It has been there since the introduction of the 2% tax in 2018.
The Treasury said the tax was necessary to bring on board those that have been outside the tax system.
The outcry was amplified in May when the government extended that tax on foreign transactions, levying a 4% tax.
Ncube is on record saying the IMTT has turned perennial budget deficits to surpluses. Zimbabwe relies heavily on taxes to fund its operations, as it has no external budget support like many other countries.
However, the government needs to strike a balance between raising revenue and ensuring that formal businesses survive.
Business is bruised after two years of disruptions caused by the Covid-19 pandemic.
They have to face intense competition under the African Continental Free Trade Area as trade under Africa’s single market takes into effect.
