BANKERS and economists have welcomed the Treasury’s clarification that the Digital Services Withholding Tax (DSWT) will not apply where Value Added Tax (VAT) is already being remitted, saying the move demonstrates responsiveness to stakeholder concerns.
In addition, players in the banking sector and economic experts said the intervention by the Treasury to provide further clarity on the tax would strengthen Government revenue inflows by reducing opportunities for tax avoidance and evasion.
The imported services affected include digital streaming and online content, e-hailing and platform-based fees, online advertising, as well as satellite-based and other cross-border digital access services.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube yesterday dispelled confusion over the scope and administration of the DSWT, explaining that taxpayers who are already accounting for and remitting VAT on imported digital services in terms of the VAT Act will not be subject to the DSWT on the same transactions, emphasising that the measure was not intended to result in double taxation.
Minister Ncube stressed that any reference to goods within the digital services framework should be understood in the context of electronically supplied or digitally mediated services, in line with existing VAT provisions.
He reiterated that the DSWT is not a new tax, but rather an administrative mechanism aimed at improving the collection of Value Added Tax on imported services that are already taxable under current legislation.
“Taxpayers who are already accounting for and remitting VAT on imported services in accordance with the VAT Act will not be liable to the DSWT on the same transactions. The measure is not intended to result in double taxation,” the minister clarified in a statement.
The ministry has also moved to correct messaging from local banks which suggested that the tax applies to all international card transactions, noting that such interpretations are inconsistent with the policy’s intent.
Economist Tinevimbo Shava said the clarification was vital in restoring confidence among businesses and consumers who had feared overlapping taxes on the same transactions.
“Double taxation distorts behaviour. When firms or individuals feel they are being taxed twice for the same activity, they naturally look for ways around the system. Through making it clear that VAT-compliant taxpayers are exempt from the DSWT on those transactions, the Government is closing loopholes while encouraging voluntary compliance.”
Mr Shava added that clear and predictable tax rules tend to broaden the tax base over time.
“When compliance becomes simpler and more predictable, more economic activity stays within the formal system. That ultimately boosts revenue without increasing rates,” he said.
Banker Mr Raymond Madziva said the clarification directed at banking communications was particularly important for both the financial sector and the wider economy. He noted that earlier interpretations risked creating unnecessary confusion for customers making legitimate international payments.
“Banks sit at the centre of payment flows. If rules are unclear, it creates friction for clients and reputational risk for financial institutions. The ministry’s engagement with banks to ensure correct and consistent application is a positive step that improves ease of doing business.”
Mr Madziva said that by confining the tax to its intended scope and avoiding its blanket application to all offshore card transactions, authorities were reducing incentives for clients to bypass the formal banking system.
“When people feel unfairly targeted, they move to cash or informal channels. That weakens financial intermediation and makes tax collection harder,” he said. “Clarity helps keep transactions within regulated channels, which is good for banks and for the Treasury.”
Both analysts said the clarification would also play a role in curbing tax evasion.
Mr Shava explained that uncertainty often creates room for deliberate misreporting.
“Clear rules reduce grey areas. When the tax treatment is well defined, it becomes easier for authorities to enforce compliance and harder for bad actors to hide,” he said.
Mr Madziva agreed, noting that consistency between policy intent and implementation is critical.
“If banks apply the rules correctly and customers understand them, compliance improves across the board. That translates into more predictable revenue for the Government,” he said.
The analysts further said the move sent a positive broader signal, adding that the willingness to clarify and correct earlier interpretations reflected a more consultative approach to tax administration.
“Responsive policy builds trust. Over time, that trust is what sustains revenue mobilisation in a growing digital economy,” Mr Madziva said.
On payment channels, the minister clarified that the tax is not limited to international card payments, but applies to all offshore payments for imported digital services, regardless of the payment channel used, where such transactions are processed through regulated intermediaries in Zimbabwe.-herald
