ZIMBABWE’S investment agency wants Treasury to scrap the Intermediated Money Transfer Tax (IMTT), saying this will improve the country’s business environment.
BERNARD MPOFU
Debt-ridden Zimbabwe has been primarily relying on domestic resources such as taxes and grants to finance some of its key capital projects as the economy continues to underperform.
Finance minister Mthuli Ncube last month reduced IMTT in foreign currency to 1% from 2% to ameliorate transactional costs which had been blamed to pushing up prices.
Market watchers say the reduction of US dollar IMTT will hopefully encourage some return of USD deposits into the banking sector, potentially resulting in some uptick in liquidity.
The Zimbabwe Investment and Development Agency says removing the tax will make the country more attractive to investors. Zimbabwe has been lagging regional peers on attracting foreign direct investment.
Critics blame this on policy inconsistency, bureaucratic inertia and poor infrastructure, among other factors.
The Minister of Finance and Economic Development gazetted an Amendment to the Finance Rate of Intermediated Money Transfer Tax (IMTT) Regulations which aim to reduce relying on domestic resources such as taxes and grants to finance some of its key capital projects as the economy continues to underperform.
Finance minister Mthuli Ncube last month reduced IMTT in foreign currency to 1% from 2% to ameliorate transactional costs which had been blamed to pushing up prices.
Market watchers say the reduction of US dollar IMTT will hopefully encourage some return of USD deposits into the banking sector, potentially resulting in some uptick in liquidity.
The Zimbabwe Investment and Development Agency says removing the tax will make the country more attractive to investors. Zimbabwe has been lagging regional peers on attracting foreign direct investment. Critics blame this on policy inconsistency, bureaucratic inertia and poor infrastructure, among other factors.
“The Minister of Finance and Economic Development gazetted an Amendment to the Finance Rate of Intermediated Money Transfer Tax (IMTT) Regulations which aim to reduce the rate of IMTT charged on individual transactions,” Zida says in its first-half investment report.
“The rate was reduced from 2% to 1%, a decision which the Agency considers as a step towards the right direction. Lowering IMTT tax will positively impact ease of doing business in Zimbabwe and the Agency can only hope for the tax to be reduced to 0.”
Before last month’s reduction of IMTT, re[1]tail giant OK Zimbabwe groaned over the tax saying the threshold was a huge burden to the business.
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 also battling low aggregate demand due to a weakening Zimbabwe dollar, rising inflation and prolonged power outages.
