Zimbabwe just proposed a partial reduction of the unpopular Intermediated Money Transfer Tax (IMTT).
They said all transfers in the local ZiG currency will go from 2% to 1.5%, while those in USD stay at 2%.
Now the Confederation of Zimbabwe Industries (CZI) has said it should be scrapped entirely.
These are their reasons, released in a statement.
IMTT was introduced as a crisis-era measure at a time of acute fiscal pressure, informality and dollarisation, largely because it is simple to administer and difficult to avoid in the formal system. Over time, however, it has become a permanent feature of the tax mix, with growing weight on formal electronic transactions.
From a productive-sector perspective, this has created a number of unintended effects that we believe now need to be addressed.
Key concerns with IMTT
Cascading impact through value chains
IMTT is charged on the full value of each electronic transfer at every stage of the value chain.
The same underlying value is therefore used multiple times as it moves from supplier to manufacturer, to wholesale; to retailer, and finally to the consumer.
Because IMTT is not creditable or refundable (including on exports), it becomes a permanent cost embedded at each stage.
For multi-stage manufacturing and distribution, this resembles a cumulative turnover tax rather than a tax on income or value added, and can work against the objective of deepening domestic value addition.
Insensitivity to profitability and cash-flow
IMTT applies at a flat rate regardless of profitability or cash-flow position.
It is payable even where firms are making losses.
This is particularly challenging for low-margin formal businesses, where the levy comes directly out of working capital.
In this sense, IMTT does not adjust to economic conditions at the firm level and can amplify stress in periods of tight liquidity.
Disincentive to formalisation and digitalisation
IMTT fails primarily on formal electronic transactions; many cash and informal transactions fall outside its reach.
The rational purpose for some firms and households is to reduce use of the banking system and digital platforms to limit the tax.
Over time, this weakens financial intermediation, slows progress on digital payments, and narrows the visible tax base.
This is at odds with national objectives around financial inclusion, digitalisation, and building a broader, more traceable tax base.
Competitiveness and exports
In a high-cost environment, the cumulative effect of IMTT on all electronic payments is a value chain raises unit costs.
Exposure cannot recover IMTT; it cannot be zero-rated or claimed back, so it is fully embedded in export prices.
This erodes margins and weakens the price competitiveness of Zimbabwean products in regional and global markets.
Given the emphasis on industrialisation and export-led growth under the National Development Strategy, this is a concern for the productive sectors.
Broader implications for the tax system
Continued reliance on IMTT has some wider implications:
It shifts the tax mix towards a narrow levy on formal, banked transactions, rather than a broad base of income and consumption.
It promotes the greater use of cash and informality.
It risks weakening the medium-term revenue base by pushing more and more economic activity out of the formal system.
CZI fully recognises dips importance of preserving fiscal stability; our concern is about how revenue is raised, and the quality of the tax instruments used.-herald
