We know that men, in their nature do not like taxes especially when they don’t see their use. The 2% tax presented by Finance Minister last week has certainly increased the animosity towards taxes in Zimbabwe. Although the Minister came up with some provisions to lighten the burden whilst at the same time maximizing the tax revenue, the tax is still unpopular and burdensome, particularly to the average Zimbabwean.
The point of contention for many Zimbabweans is that when individuals want to move their money from their bank to their mobile money wallet (bank-to-wallet) they are charged the 2% tax yet companies can move their funds between their accounts without any charge of the 2% tax. After being charged 2% for bank-to-wallet transfer, individuals are then charged 2% tax for other transactions and funds transfers. That looks like double taxation.
With respect to this, we wanted to know the Minister’s reasoning behind choosing to penalize, so to speak, (with double taxation) Zimbabweans for moving funds from bank-to-wallet yet mobile money is integral to promoting financial inclusion. Isn’t the 2% tax (double taxation) dissuading people to use mobile money and ultimately negating the financial inclusion efforts?
What the minister had to say
In his interview the Minister was very dodgy, he goes at a tangent talking about the implications of governments extravagance on the broader economy and the need to charge the tax fairly across the board. Yet the answer he should provide should address is, why is he choosing to hurt the average Zimbabwean for wanting to use mobile money? Here is the Minister’s conversation with NewsDay;
Finance Minister, Professor Mthuli Ncube- MN
ND……you protect intermediary accounts of companies, yet you don’t protect a person who wants to move their salary from their bank account to their mobile money platforms like EcoCash for a transaction where there is no swipe machine. A person who moves $400 from their bank account to their EcoCash account or their other bank account is charged while companies are exempted.
MN: You see, previously when we announced, the companies were going to pay a lot of money (which was bad because) then you start impacting on their profitability, their ability to employ people and so forth.
I think it’s fair. What we have done is we have capped the burden for the wealthy and companies and also capped the burden for the poor also, so we have impacted both ends of the spectrum and that way is progressive.
ND: Minister, if your cap for the poor is benchmarked at $10, what of a poor civil servant who earns $400 who wants to move their money? This person is paying VAT [value-added tax], income tax, airtime tax, among other taxes?
MN: No, no, you see, we have a bleeding patient and the patient needs to be fixed. So we have to stop the bleeding, we have a huge domestic debt, we need to plug that hole.
Listen, you don’t realize that you are already paying, you are already bleeding. You know what’s happening because of the high budget deficit and the issue of Treasury Bills which are keeping interest rates high?
Those interest rates are translating into a high cost of capital, especially for SMEs [small-to-medium enterprises]. So, if SMEs can’t access credit and do their business and employ people, that’s a cost to the nation.
So, you are paying already, but you are paying indirectly you don’t realize it. So, the idea is to fix that original problem by making sure that all Zimbabweans are in on it.
If we move to a budget surplus, that will solve inflation issues, cost of capital issues and so forth and then this economy will move to a position of strength and then you will see prosperity.
It seems the Minister was trying to strike a balance by making both companies and individuals feel the pinch of the tax. Companies by their nature of dealing with large amounts will pay more tax compared to individuals who deal with small amounts. So, to create the balancing act, the Minister chose to take advantage of the bank-to-wallet transaction, that is so popular with average Zimbabweans, and charge the 2% tax for doing the transaction. So its now pennywise to keep your money in the bank account than to transfer it from the bank account to the mobile money (bank-to-wallet).
The same way Professor Mthuli Ncube is trying to strike a balance in the burden borne by individuals and companies so is he trying to strike a balance capping the burden borne by both parties too.
Reminder: We have done an insightful report on the payment system of Zimbabwe. You can purchase it below
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