THE increase in the intermediated money transfer tax (IMTT) from 1% to 2% on US dollar transactions has been criticised by legislators as a counter-productive measure which will discourage people from banking their foreign currency.
RUVIMBO MUCHENJE
Through Statutory Instrument 80 of 2024, Finance minister Mthuli Ncube increased the IMTT from 1% to 2% with effect from 4 April 2024.
During Wednesday’s question-and-answer session in the National Assembly, Women’s quota MP for Manicaland Miriam Matinenga asked deputy minister of Finance Kuda Munangagwa (pictured) on the rationale behind increasing the tax, given the rise in robberies targetted at those who are keeping their money at home.
“Now that we have the new currency, ZiG, does the IMTT of 2% encourage the use of ZiG, especially when we take cognisance of the fact that we need to encourage the use of the banking sector and avoid robberies which are rampant in this country? I am directing this question to the minister of Finance,” queried Matinenga.
Recent reports by the Zimbabwe Republic Police show that an average of US$10 000 is stolen by armed robbers from various homes, schools and companies across the country.
The police have urged people to bank to avoid robberies, but the IMTT increase might discourage these efforts.
“Now that we have increased the IMTT for the US dollar yet you want to encourage the use of the banking sector, do you not think that you are encouraging people to keep money in their homes?” he asked.
Mnangagwa acknowledged that the net effect could be discouraging members of the public from banking their money.
“I think that is a fair comment. Increasing the transaction cost does indeed dissuade the general populace from transacting electronically, but this is something we have had to deeply introspect upon trying to balance the need to collect revenue versus the effort of allowing everybody to be financially included.
“At this juncture, we are still leaning towards the revenue collection necessity and we will continue to monitor as we go along, whether this skew hinders people from entering the realm of financial inclusion and electronic transactions upon which we can review,” he replied.
Mnangagwa said the idea behind increasing the IMTT is to ensure that the preference of which currency to use is not based on transaction fees.
He said the move is intended at putting the ZiG at the same level of competition as the US dollar.
“To provide fuller context, this would be in comparison to the use of the US dollar. The minister of Finance, through the Minister who issued an S.I. [statutory instrument] a few days ago, increased the IMTT on the US dollar transactions. Prior to that, the IMTT on US dollar electronic transactions was 1%. It has now been equated to the ZiG IMTT which puts the two currencies at par. What that does is that it becomes the same to transact in either currency, henceforth one is not deterred by the IMTT itself on the currency of choice,” he said.
Mbizo Constituency MP Corban Madzivanyika bemoaned the chunk that the 2% tax would take from the transacting public and requested that it be reviewed downwards.
“My supplementary question to the minister is, increasing IMTT of USD to 2% actually jeopardises more because it does not create demand for ZiG. If you check, for example, 2% of ZiG100 thousand, is equal to two thousand. It is a big amount. We thought that the minister would take it down. Can the minister consider reducing IMTT on ZiG transactions from the 2% to probably 0.5% to encourage demand for the ZiG?” asked Madzivanyika.
The ZiG has been in circulation since 10 April, but has not been as warmly welcomed by the transacting public as anticipated by the authorities. This has led to mass arrests of foreign currency dealers and a crackdown on retailers that are rejecting the ZiG.
