NDAMU SANDU
If taxation without consent is not robbery, then any band of robbers have only to declare themselves a government , and all their robberies legalised, American political philosopher Lsyander Spooner once said.
His remarks were replayed this week after Treasury reviewed the Intermediated Money Transfer Tax to 2 cents per dollar transacted from 5 cents per transaction as part of measures to collect revenue.
The tax was introduced in 2003. Announcing the measure, Finance and Economic Development minister Mthuli Ncube said due to increased informalisation of the economy and huge increase in electronic and mobile phone-based transactions, there was need to expand the tax collection base and ensure that tax collection points are aligned with electronic mobile payment transactions and the Real Time Gross Settlement (RTGS) system.
Not many were amused. In fact a social media campaign has now been launched calling for the immediate resignation of the Reserve Bank of Zimbabwe governor John Mangudya who preached the use of plastic money. For a government battling excessive expenditure, the decision to squeeze tax payers was widely criticised.
This measure has riled labour and economists who say it would further burden the already over-taxed Zimbabwean.
“This extension of the collection of the Intermediated Money Transfer Tax to all electronic financial transactions is regressive in that itnegates the very essence of such platforms that were established to promote financial inclusion,” the Zimbabwe Congress of Trade Unions (ZCTU) said in a response to the fiscal and monetary measures.
It said taxing of the formerly financially excluded poor people, especially in rural and urban communities was highly regressive andretrogressive adding that the measure flies in the face of efforts to create a cash-lite society.
“Clearly, therefore, this regressive tax is at odds with the vision of the monetary authorities to create a cashlite society by 2020,” ZCTU said.
Economist Moses Chundu said the introduction of the 2% tax on electronic transactions, while an attempt to increase government revenue, was an unnecessary burden on the already overtaxed citizens and flies in the face of efforts to promote the use of electronic money.
For example, if one were to transfer $1 000, the tax will be $20. This is in addition to other charges set by banks or mobile network operators. The high tax comes at a time when the economy is facing a serious cash crisis since 2016. This has seen cash barons putting a 10 percent premium on cash despite the introduction of the bond note in 2016 as an export incentive measure and to ease the prevailing cash shortages.
Ncube wants to capitalise on the increase in electronic and phonebased transactions which have surged to 1,7 billion from 50 million in 2014 and raise revenue in the wake of runaway government expenditure that has seen Treasury borrowing from the domestic market and RBZ. The domestic debt has accelerated to $9,5 billion from $275,8 million in 2012, indicating that government had failed to live within its means. Government’s overdraft at RBZ has fattened to $2,3 billion, surpassing the statutory limit of $762,8 million. On Monday, Mangudya directed banks to operationalise the ringfencing policy by separating foreign currency accounts (FCAs) into two categories—namely nostro FCAs and RTGS FCAs.
This is designed to encourage exports, diaspora remittances, banking of foreign currency into the Nostro FCAs and to eliminate the dilutioneffect of RTGS balances on Nostro foreign currency accounts.
Chundu said the measure was peace-meal and skirt around the real underlying causes of market disequilibrium.
“At the centre of distortions in the monetary sector and its effect on the rest of the economy is the illadvised introduction of the bond on a 1:1 rate. Until that is resolved there won’t be enough confidence building to stabilise the financial system. Separating RTGS FCA and real FCA is a partial solution which will not achieve much without corresponding adjustment in the fictitious rate,” he said.
The country’s labour union said the two-tier system for FCA would create an “elite class” made up of international organisations, diaspora remittances, free funds, export retention proceeds and loan proceeds (foreign currency earners) who will use what Gresham’s Law refers to as ‘good money’ (Nostro FCA balances) while the rest of the public is relegated to the use of ‘bad money,’ – RTGS FCA balances. Already some retailers are now demanding the greenback as payment saying charging in local currency makes them difficult for them to recover costs. Many are likely going to follow, triggering a wave of either price increases or shortages of some goods and services.
The ZCTU said the 1:1 parity will not hold ground.
“…it is clear to all and sundry that with the huge shortage of multicurrencies, electronic and RTGS transfers which are not backed by any physical cash have a much lower value as reflected by the premium on physical cash on the thriving parallel market of foreign currency. Those currencies deemed RTGS balances cannot be used for external payments and will continue to lose value due to inflation,” the ZCTU said warning the categorisation reinforced the inherited distorted “dual and enclave economic structure.
