Business pushes for double taxation removal
INDUSTRY wants Treasury to make the intermediated money transfer tax (IMTT) — commonly referred to as the 2 percent tax — tax deductible, arguing it has become a significant and additional cost to business.
A tax deduction lowers a individual or organisation’s tax liability by reducing their taxable income.
Deductions are typically expenses that the taxpayer incurs during the year that can be applied against or subtracted from their gross income to figure out how much tax is owed.
In the 2022 Budget, Finance and Economic Development Minister Professor Mthuli Ncube indicated that revenues from the IMTT tax rose to $28,9 billion in the nine months to September 2021 against a target of $22,7 billion.
The IMTT has become a significant source of revenue, which has helped Treasury to bankroll key projects.
“Performance of the revenue head benefited from the extension of IMTT to foreign currency transactions and increased value and volume of transactions during the period under review,” Minister Ncube said.
However, the IMTT, which was introduced in 2019 to capture the informal sector that ordinarily did not pay any taxes despite making up a huge chunk of local transactions,
now accounts for nearly half the contribution of corporate tax — the biggest revenue head.
Corporate tax totalled $59,8 billion against a target of $54,2 billion during the January to September period, accounting for 19 percent of total collections.
Overall, in the same period, revenue collections stood at $317, 4 billion against expenditures of $351,7 billion, translating to a $34,3 billion deficit.
The IMTT is part of other indirect taxes that contributed 11,1 percent to total collections.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Mr Chris Mugaga said the IMTT was tantamount to double taxation.
“I think the challenge with IMTT is that when it was introduced, the idea was to tap into the informal economy, but it is now creating the challenge that it is promoting double taxation.
“For businesses that pay their taxes formally and are registered, that should be deductible,” he said.
It was the implementation of the IMTT, he added, that was a challenge.
It is believed that businesses are also being levied the tax when transferring funds between accounts owned by the same company.
Confederation of Zimbabwe Industries (CZI) chief executive officer Ms Sekai Kuvarika said the 2 percent tax was a huge cost for business.
“Even employees, the money that you earn; after paying pay as you earn (PAYE), you are then taxed upon transacting. We have multiple layers of taxation at the end of the day and it’s really a burden; it is a burden on business,” Ms Kuvarika said.
OK Zimbabwe said the tax was a burden on the retail giant during the six months to September 2021, after payments grew by 233 percent to $450 million from $135 million for the prior year comparative period as a result of the increase in tax ceiling per transaction.
In the company’s interim period financial statement, OK Zimbabwe chairperson Mr Herbert Nkala said the increase in tax significantly eroded the business’s gross margins.
Industry remains cautiously optimistic on prospects for 2022 in view of the evolving coronavirus situation.