It was a matter of time wasn’t it? The 2% tax levied on all electronic transactions by the government is such a cash cow, it is not going anywhere. The only direction we should expect it to go is upwards or sideways. Today, in his mid term budget review the minister of finance has extended the tax sideways to cover foreign currency denominated transactions which had been exempt from the painful tax up to now.
Here’s what the minister proposed to parliament:
Payment of IMTT on Foreign Currency Transactions
Current legislation exempts the transfer of money into and from Nostro
foreign currency accounts from intermediated money transfer tax.
I propose to extend Intermediated Money Transfer Tax to cover foreign
For the avoidance of doubt, transactions conducted by organisations
accredited in terms of the Privileges and Immunities Act (Chapter 3:03)
remain exempt from IMTT.
The poor can afford to pay more
The minister is also reviewing the threshold below which transactions are exempt from paying the 2% tax. He says:
In line with market conditions, I propose to review the Intermediated Money Transfer Tax free threshold for local currency transactions from ZW$100 to ZW$300. In addition, I propose to exempt from tax, foreign currency transactions not exceeding US$5.
It is interesting to note that when this tax was introduced the threshold for exemption was USD10.00 which the minister said protected the poor. However his revision of the local currency threshold moves it from the current USD1.00 (due to inflation) to USD3.00 and for forex it’s set at USD5.00. Looks like Ncube discovered that the poor are richer than he thought…
The rich get a break
The maximum transaction tax that can be paid per transaction was also reviewed:
I, further propose to review the maximum tax payable per transaction by
corporates from ZW$25 000 to ZW$50 000 on transactions with values
exceeding ZW$2 500 000.
I also propose a maximum tax of US$ 2 000 for foreign currency transactions with a value exceeding US$ 100 000.
When the tax was first introduced the maximum amount that can be paid per transaction was USD10,000. With this review yes in local currency the value has increased but not to the level where it was when the tax was introduced. The new maximum for local currency transactions is equivalent to about USD500. For forex transactions it’s going to be a painful USD2,000 but this is better than the 10k that was there at first.