IMTT won’t go away soon: Minister

FINANCE and Economic Development Minister Professor Mthuli Ncube says the Government will review the intermediated money transfer tax (IMTT), commonly known as 2 percent tax, but this will not happen in the short to medium-term.

Businesses want the IMTT to be made tax deductible, arguing it has become a significant and additional cost to business operations.

Professor Ncube told businesses, economists and stakeholders at a post -2022 National Budget breakfast meeting hosted by ZTN and Business Weekly that the Government was cognisant of business concerns over the tax, popularly known as the 2 percent and would look into reviewing it as per industry requests.

However, he said the review would not come immediately as the Government still had a lot of projects and programmes that required funding while the 2 percent tax was one of the major sources of State revenue.

“It is still too early to make adjustments on the IMTT, we still have a lot that needs to be done at the moment. But we will look into it because we are a listening Government,” said Prof Ncube.

The IMTT was introduced in 2019 to capture the informal sector that ordinarily did not pay any taxes despite making up a huge chunk of local transactions, now accounting for nearly half the contribution of corporate tax — the biggest revenue head.

In his 2022 National Budget, Prof Ncube indicated that revenues from the IMTT tax rose to $28,9 billion for the nine months to September 2021 against a target of $22,7 billion.

However, the IMTT, which was introduced to capture the informal sector that ordinarily did not pay any taxes despite accounting for a huge chunk of local transactions, now accounts for nearly half the contribution of corporate tax — Zimbabwe’s second biggest revenue head, after value added tax Corporate tax totalled $59,8 billion against a target of $54,2 billion during the January to September period, accounting for 19 percent of total collections.

Overall, in the same period, revenue collections stood at $317, 4 billion against expenditures of $351,7 billion, translating to a $34,3 billion deficit.

The IMTT is part of other indirect taxes that contributed 11,1 percent to total collections.
However, businesses feel the 2 percent tax is becoming taxing to their operations and called on the Treasury to review it and make it tax-deductible.

Confederation of Zimbabwe Industries (CZI) economist Victor Bhoroma said this was worsening the cost burden for businesses, now forced to pay the tax for every transaction they make, even for internal transactions.

Captains of industry and commerce claim the IMTT adds a significant additional cost to numerous other onerous tax obligations they carry.

“We would want this to be tax-deductible, like other taxes,” he said.
SME Association of Zimbabwe chief executive Mr Farai Mutambanengwe concurred the IMTT must be tax-deductible as it weighed on the budding entrepreneurs at a time they are trying to find their footing.

Minister Ncube further highlighted that the government was content with the present setup where firms are remitting their taxes in the currency of trade, indicating that the government was also in dire need of the US dollars given some of the ongoing developmental and infrastructure projects.

“We are quite comfortable with the current system as a government, where individuals and corporations pay their taxes in the currency of trade.

“Then on business wanting to pay corporate tax in Zimbabwe dollars and not US dollars, colleagues we also want to be fair, the government also needs these US dollars to pay for services, how do you think these roads are being built,” said Minister Ncube.

Minister Ncube also noted that the Government had started paying contractors involved in roads, dams, and other infrastructure projects using US dollars in the past two months.

“We cannot have a situation where only the government is paid in Zimbabwe dollars when everyone else wants to be paid in US dollars and yet we need the US dollars as well.

“Last month and month before we paid contractors in hard US dollars, that was the only way they could move faster and also that was the only way they could cushion themselves against the rising inflation,” he said.-The Herald