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4% forex tax & withdrawal levy: Forever banishing the idea of banking USD

4% Tax Forex, IMTT

Wangu wangu wangu! Might be an overplayed meme at this point, but it perfectly captions the response I and many others had to the new economic measures presented by the President late last week. Chief among those measures was an incentive for the use of local currency by slapping a 4% tax on forex transfers with the intermediary money transfer tax (IMTT) for local currency remaining at 2%.

Government is, with immediate effect, putting in place a differential taxation system for the Intermediary Money Transfer Tax (IMTT) as follows:

(i) 2% would continue to apply to local currency transfers; and

(ii) All domestic foreign currency transfers to attract an Intermediary Money Transfer Tax (IMTT) of 4%

President’s speech (via The Sunday Mail)

The first question this raised in my mind was…

Why is the govt prioritising reported figures over the needs of the average Zimbabwean?

I am definitely preaching to the choir and forgive me for doing so, but it appears that the macro economic outlook seems to be taking precedent over micro ones. By that I mean, there is a priority for those matters that affect the big figures we see reported by the government than the effects policies have on the average household.

We are all well aware that the only way to retain any sort of value these days is if you hold USD in cash. This allows people to hedge their bets against the parallel market rate and make gains so that they can improve their purchasing power. This unfortunate practice has been a consequence of living in Zimbabwe because many are losing money hand over fist if they keep local currency for any stretch of time.

The ZWL$ has become a currency people buy things with to gain an advantage over business owners who aren’t up to date with the ever-changing parallel market rate.

What I thought would be the “route one” way of doing things was to introduce incentives to entice the average citizen to bank their USD. Zimbabwe is a largely informal economy and even those with formal employment have side hustles where they earn cash in order to meet their rolling commitments.

Why then would the government openly disincentivise the electronic transfer and use of USD in favour of a currency that has no certain rate on the street? Is it not incumbent on the Ministry of Finance to draft measures that will make it easier for the average Zimbabwean to renew trust in the financial system instead of making mattress banking a risk worth taking?

I wish I had the answers to these questions, however, it looks like the financial authorities are hell-bent on discouraging the official use of a currency that is unanimously the one that everyone wants to deal with. I mean even some government institutions, like the passport office, are only taking payment in the United States Dollar.

Why there is no shared consensus between the average Zimbabwean and the government that, until there is certainty and backing for the local currency, the USD is a necessary evil, is beyond me…

The withdrawal levy

On top of the 4% tax on forex transfers, the government also announced a withdrawal levy for USD…

There is a preference to withdraw foreign currency for transaction purposes, thereby undermining IMTT collections, given that cash withdrawals are not liable to IMTT.

In order to discourage thie withdrawal of cash which is traded on the parallel market, the cash withdrawal levy for amounts above US$1,000 will with immediate effect, be reviewed from 5 cents per transaction to 2%

Again… Who is going to find it sensible to deposit their hard-earned USD to face a 4% tax if they play to use it electronically plus get slapped with a 2% tax for withdrawals above US$1,000?

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12 thoughts on “4% forex tax & withdrawal levy: Forever banishing the idea of banking USD

  1. …and to a few months ago they wr encouraging pple to deposit their usd claiming its safe wat wat….with banks coming up wit very tiny incentives. this is da reason why noone in his right mind will do n as a result pple will olwz come up with ways to avoid those charges through matress banking…does this apply to civil servants as well or its for us only. they jus encourage mistrust n backdoors vega…now banks will be charging exorbitant bank fees as their line of revenue has been cut by suspending loans…who suffers, the public n not them….end of it, bank will retrench, more unemployment as there is nothing there to be done……DEVILS SPAWNS.

    1. Well off topic, but was Shannara Chronicles any good? I deleted my hoard of unwatched shows to open up some good sectors on my dieing drive😅

    2. What it only means is that ,whosoever needs the cash US$ will have to folk out and pay the 4% transfer fees plus the 2% withdrawal fees if one has withdrawn over us$1000 from his/her bank selling it on the black market. This literally means the black market rate will increase simple!!! As someone will just push all those taxes to the one who needs the us$. Hakuna kwatirikuyenda with such beerhall economics

  2. I’m being charged 25usd per 1000 withdrawal from my bank since I got the FCA 6 months ago…. Nothing new…. And there no swipe card and most of my suppliers don’t have nostro…. So not much of a difference… Pass it onto the consumer

    1. Passing it on to the customer simply means at some point it will come back to you as the general price of goods and services will rise in USD terms. The country will soon find itself very uncompetitive on the export market because it produces very expensive goods and services in USD terms. On the flip side it becomes very attractive for foreigners to bring in cheaper imports and mop up the USD from within our economy. The best business to run is one that makes money in an overpriced country like Zimbabwe but spends the profit in a cheap country (think China, Pakistan, India, Nigeria, etc). Zimbabwe is royally f….d

  3. Banks are not loaning anyway… So not much there anyway… The black market is to far ahead of interest rates they could just doing it themselves… Intact who in their right mind would allow an rtgs loan at this moment

  4. My boss was just the other day saying I should open a nostro for side projects. It sounded like a sensible plan at the time, but tsho! Zim be doing Zim things! Plans come here to die🥲

  5. Mthuli,Gorge and John the 3 musketeers got statistics from Mukuru and Access that remittances were over US$1billion annually and in no time they want 4% of those receipts from the diaspora. Manyangira yaona varume mari tinounza other means from diaspora. IMMT my foot. Kkkk

  6. That’s absurd they are failing to find a kind term solution always leaning on 2minutes solutions which are in favour of themselves.

  7. Wonderful and smart way of rech AR recharging other networks…… Keep it up to and!

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