Govt introduces fresh tax to keep forex inland

For years, the formal financial institutions’ foreign currency supply has been dwindling despite central bank estimating that there was potentially US$2,5 billion unbanked in the economy.
FINANCE minister Mthuli Ncube says government will tax US$0,02 for every US$1 leaving the country to ensure forex availability locally, as the State desperately tries to protect the Zimbabwe Gold (ZiG) currency introduced a few weeks ago.

For years, the formal financial institutions’ foreign currency supply has been dwindling despite central bank estimating that there was potentially US$2,5 billion unbanked in the economy.

In Statutory Instrument (SI) 80 of 2024 published in the Extraordinary Government Gazette dated May 3, 2024, government will retain US$0,02 for every US$1 leaving the country.

These changes were made under the Finance Act whereby the Finance Amendment of Sections 22B and 22G Regulations, 2024, introduces changes to the automated financial transactions tax and the intermediated money transfer tax (IMTT).

“Section 36G (2) of the Taxes Act shall be calculated at the rate US$0,02 on every dollar of every outbound foreign payment or part thereof for each transaction on which the tax is payable,” Ncube said in the SI.

The move is most likely to affect local industry importing raw materials and foreign headquartered businesses operating locally, who are remitting back to their respective countries.

Also, the new measure will affect outbound remittances and those who transact online with businesses not domiciled in Zimbabwe.

Such a move will likely add to the already high cost structure of businesses and further pile inflationary pressure on the economy.

Ncube also introduced new charges for withdrawing ZiG and on local currency transactions.

“It is hereby notified that the Finance, Economic Development and Investment Promotion minister has, in terms of Section 3 of the Finance Act [Chapter 23:041, made the following regulations: These regulations may be cited as the Finance (Amendment of Sections 22B and 22G) Regulations, 2024 Amendment of Section 22B,” he said.

“Section 22B (‘Automated Financial Transactions Tax’) is amended by the repeal of Section 22B(a) and substitution with the following: For each withdrawal above the local currency equivalent of US$100, a regional currency equivalent of US$0,05.” will be charged.

Regarding the IMTT, this will be calculated at a rate of 0,02 on every ZiG transaction or part thereof transacted for each transaction on which the tax is payable.

“Provided that if a single transaction on which the tax is payable is equivalent to or exceeds the equivalent in Zimbabwe Gold [ZiG] of US$500 000 (at the prevailing interbank rate) a flat intermediated money transfer tax of the equivalent in Zimbabwe Gold [ZiG] of US$10 150 (at the prevailing interbank rate) shall be chargeable on such transaction,” Ncube continued.

The SI stated that Section 36G(2) of the Taxes Act shall be calculated at the rate of 0,02 on every US dollar or part thereof for each transaction on which the tax is payable.

“Provided that if a single transaction on which the tax is payable is equivalent to or exceeds US$500 000 a flat intermediated money transfer tax of US$10 150 shall be chargeable on such transaction,” Ncube added.

A charge of 0,02 was also levied on every Zimbabwe-gold-backed digital token or part thereof transacted for each transaction on which the tax is payable.-newsday