TAX collector Zimbabwe Revenue Authority (Zimra) missed its third quarter target on Intermediated Money Transaction Tax – the controversial 2% charge on electronic transactions – after the Reserve Bank of Zimbabwe
(RBZ) tightened screws on mobile money platforms in a bid to contain a rampant informal foreign currency trading market.
Official statistics obtained from Zimra show revenue performance for the quarter ended 30 September plunged due to the crackdown on Econet and other mobile money networks – costing the tax collector $ZW$1.9 billion; 32.2% of the revenue head target.
“The intermediated money transfer tax (2%) lost its momentum, missing the target of ZW$5,9 billion by ZW$1,9 billion and contributing only 6.86% to total revenue for the quarter,” Zimra vice-board chairperson Josephine Matambo, said.
“This was partly due to the monetary policy interventions introduced to harness the local currency depreciation that was threatening economic stability.”
During the same period last year, the 2% tax registered over a 400% revenue increase, but after the crackdown its tax contribution dwindled.
Mobile money networks platforms in Zimbabwe include Ecocash, One Money, MyCash, and Telecash.
Ecocash, a subsidiary of privately owned Econet Zimbabwe, is the largest among them all as it accounts for 94% of all mobile money transactions in the economy.
Cassava Smartech Zimbabwe Limited, a subsidiary of Econet which runs the Ecocash platform, recently said in a trading update that its mobile money transfer unit registered an 11% transactional value decline in the face of a stricter operating environment imposed by the central bank.
The nature of transactions processed on the Ecocash platform, which are high volume and low value, have seen the value of transactions on the platform going down to about 19% of the total value on the National Payments System, from 30% in 2019.
During the third quarter of this year, the net revenue collections of ZW$57 billion were however 27.16% above the targeted ZW$44.83 billion.
Compared to the same period last year where ZW$6.42 billion was collected, nominal net revenue collections grew by 788.16%.
On June 27, the central bank suspended all merchant transactions except for receiving payments for goods and services as well as payment of utilities – water, power and airtime – which have been limited up to ZW$5 000 per day.
The bank also said all mobile money liquidations should be done through the banking system, while bulk payer transactions had been suspended with immediate effect.
The RBZ said these unprecedented measures had been necessitated by the need to protect consumers on mobile money platforms which have been abused by unscrupulous and unpatriotic individuals as well as other entities to create instability and inefficiencies in the economy.
Econet and other platforms denied the claims. The platforms were also directed to integrate on the ZimSwitch platform, among other tough measures.
RBZ defended the directives, saying they were meant to block illegal foreign currency dealers from manipulating the platforms by increasing parallel market exchange rates and derailing government’s efforts to stabilise the economy.
But all revenue heads registered positive growth in nominal terms despite the electronic tax decline by 32.2% in real terms.
Major contributors to net revenue collections for the quarter were individuals at 15.26%, companies (14.63%), excise duty (14.17%), Value-Added-Tax (VAT) on local sales (13.24%) and VAT on imports (13.08%).
“Customs duties, which are usually among the top five contributors, only contributed 9.40% due to the impact of the lockdown on imports: only food, medicines, protective clothing and machinery were being imported, and these were mainly either duty free or subject to duty rebates,” Matambo said.
On the outlook, Matambo said momentum in revenue collection was expected to increase in the last quarter of the year with the collection target for the year having been upped to ZW$172 billion.
She said growth is expected to come from increased productivity with the opening up of more business sectors in the economy in the post-Covid-19 environment.
“In addition, the government’s strategy to target low hanging fruits in various sub-sectors of the manufacturing industry is expected to attract the much-needed investment for domestic production,” Matambo said.
“South Africa has opened its borders and cross-border trade is therefore expected to increase thereby feeding into higher collections in import duties. The weather forecasts are projecting good rains in the coming farming season; this boosts economic activity in all sectors as value chains can then be easily promoted.”