Captains of industry are pushing for the removal of the contentious Intermediate Money Transfer Tax (IMTT) imposed on domestic transactions saying the tax was hurting businesses.
The IMTT was introduced in 2018 as Treasury seeks to make the informal sector pays taxes.
However, the IMTT has overly taxed the formal taxpayers and drive them out of business, according to Zimbabwe National Chamber of Commerce President Mike Kamungeremu.
“It should be noted that the IMTT tax is a tax on an expense and not on revenue. IMTT, therefore, is in fact more of a cost or an expense and such should qualify as a deduction the same way other transaction-based taxes such as customs duties, and stamp duties are allowed as a deduction,” Kamungeremu told Business Times.
He said the intermediate transaction tax has a “compounded effect” on the supply chain due to the incremental tax charged from the producer to the consumer.
Kamungeremu said a tax is charged on revenue rather than on an expense, as such one would not expect the tax calculated on his “taxable income” to be included as a deduction in the determination of the “taxable income”.
Section 16(1) (d1) of the Income Tax Act prohibits the claiming of the tax on income as an expense for income tax calculation purposes.
Kamungeremu said to cushion the supply chain layers against the increased cost of production; the cost is passed on to the consumer in the form of price increases across all goods.
“Prices of commodities have, therefore, been increasing further pushing up the average cost of the basic consumer basket which has resulted in the unintended consequences of reducing the quality of life for the population,” he said.
“Other effects of the tax to be taken into consideration include the double taxation effects of the 2% or 4% tax that has the effect of imposing tax on tax.
“When an entity acquires goods, which are subject to Value Added Tax (VAT), the 2% or 4% tax is calculated on the amount inclusive of the VAT amount.
“The 2% or 4% tax basically does not take into consideration the rules of double taxation but taxes the players in the supply chain on amounts including VAT,” Kamungeremu said.
In a statement accompanying full-year results, leading food chain Simbisa Brands Limited chairman Addington Chinake said the IMTT should be removed immediately as it is hurting the business.
“There is a dire and urgent need to address the current and unnecessarily punitive taxation laws in particular the IMTT,” Chinake said.