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OK Zim groans under money transfer tax burden

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RETAIL chain OK Zimbabwe, says it has approached the country’s tax agency to review the 2% Intermediated Money Transfer Tax (IMTT), saying the current threshold is a huge burden to the business.

BERNARD MPOFU

According to the company’s annual report for 2021 which was released this week, OK Zimbabwe this year paid over ZW$1 billion in IMTT out of its total tax obligation of ZW$3.4 billion paid to date as the tax head surpassed corporate tax for the first time in three years.

 Experts say apart from the weakening domestic currency currently pushing prices, the country’s multiple layers of tax are also inflationary. IMTT is now applied to all transactions, even on formal businesses that also pay corporate tax.

Local businesses are battling low aggregate demand due to a weakening Zimbabwe dollar, rising inflation and prolonged power outages.

 “OK Zimbabwe seeks active real-time engagement with tax authorities on issues requiring clarity. The group chief finance officer communicates with the Zimbabwe Revenue Authority (Zimra) regarding all tax matters. When governments look to develop or change tax policy, they invariably seek input from a wide range of interested stakeholders, including business advocacy groups and a large number of individual companies,” reads the annual report.

 “OK Zimbabwe, through its retail association and its tax consultants, engages with the government of Zimbabwe to provide perspective on how best to balance the need for government revenues from taxation against the need to ensure sustainable business continuity. In that respect the group is engaging the authorities to review the thresholds/mechanics of the IMTT tax, as the tax in the current format negatively impacts viability of formal businesses.

“We are operating in a highly volatile trading environment and we have been closely on the watch for any changes in tax legislation to avoid any noncompliance issues. Tax consultants and auditors reviewed our tax position, policies and computations and provided feedback on whether the processes are sufficient and if further action was to be taken.”

The Zimbabwe Revenue Authority says it was owed ZW$33.2 billion in unpaid taxes as of December 2021 compared to ZW$8.6 billion recorded during the previous year as companies and individuals battled economic headwinds triggered by Covid-19 induced lockdowns which restricted business activity.

According to the Zimbabwe Revenue Authority’s annual report, net revenue collected grew in nominal terms from ZW$23.19 billion collected in 2019 to ZW$463.57 billion collected in 2021. The nominal growth in revenue collected mirrors growth in gross domestic product and inflation.

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