Banks exert pressure on Mthuli

LIVINGSTONE MARUFU

Banks are exerting pressure on Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube to scrap the Intermediated Money Transfer Tax (IMTT), arguing that the levy is stifling formal business activity, discouraging digital payments and undermining economic growth, Business Times can report.

In submissions ahead of the Mid-Term Budget Review, expected this month, banking industry players said the IMTT has become one of Zimbabwe’s most significant structural impediments to financial intermediation, investment and economic expansion.

They urged Treasury to abolish the tax entirely, arguing that the reduction of the rate from 2% to 1.5% has failed to address its adverse impact on the economy.

The growing pressure comes as government seeks to deepen financial inclusion, expand the tax base and stimulate private sector-led growth.

The Bankers Association of Zimbabwe (BAZ) warned that companies are grappling with a combination of high borrowing costs, rising taxes and increasing regulatory obligations that are eroding competitiveness.

“IMTT is a significant hindrance to banking sector growth and fuels informalisation and tax evasion,” BAZ said in its submission.

The association proposed either abolishing the tax immediately or introducing a lower, tiered structure that would favour productive sectors, value-chain payments and other strategic economic transactions, while providing a clear roadmap towards its eventual elimination.

According to BAZ, reducing the tax to around 1% or removing it entirely, would ultimately boost government revenues by encouraging businesses and consumers to migrate from cash transactions into the formal banking system, increasing transaction volumes and broadening the tax base.

The bankers said they were prepared to support the transition through merchant onboarding, promotion of digital payments and value-chain integration, but argued that IMTT remains the single biggest obstacle to those efforts.

“The broad application of IMTT increases the cost of transacting for businesses and consumers, discourages digital financial usage and formalisation, encourages migration toward cash-based and informal transactions, and suppresses transaction volumes,” BAZ said.

The association warned that the resulting decline in bank deposits has weakened the financial sector’s ability to extend credit, constrained lending to productive sectors and reduced the effectiveness of monetary policy.

“It should therefore be viewed not only as a revenue instrument, but also as a determinant of financial sector depth, formalisation and economic efficiency,” BAZ added.

The Zimbabwe National Chamber of Commerce (ZNCC) echoed the call, urging Treasury to abolish IMTT completely.

“Remove IMTT completely. It will restore digital payments, reduce cascading costs and broaden the VAT and income tax base,” ZNCC said.

The chamber argued that available evidence shows the tax has reduced electronic transaction volumes as businesses increasingly consolidate payments or revert to cash to minimise tax exposure.

It said the disconnect between the size of Zimbabwe’s economy and the country’s relatively shallow banking deposits reflects substantial economic activity taking place outside the formal financial system.

Beyond IMTT, business organisations urged Treasury to reduce the overall tax and regulatory burden, warning that multiple taxes, levies and licensing requirements imposed under different laws continue to inflate operating costs and discourage formalisation.

BAZ also called for a more collaborative approach to tax administration, saying aggressive audits, retrospective interpretations and punitive enforcement create unnecessary uncertainty for compliant taxpayers and discourage investment.

The banking industry further urged authorities to repeal provisions limiting the deductibility of management fees and financing costs, arguing that they result in economic double taxation and reduce Zimbabwe’s attractiveness to international investors.

ZNCC proposed a comprehensive review of Zimbabwe’s tax regime, including consolidation of overlapping taxes and statutory levies through a General Laws Amendment Bill to simplify compliance and improve taxpayer certainty.

The chamber also urged government to address rising public debt, ring-fence resources for clearing domestic arrears and cap taxes and levies on fuel at US$0.40 per litre to ease production costs across the economy.