Groundswell of caution over ‘punitive’ IMTT Captains of industry want 2% tax scrapped

THE groundswell of caution over Intermediated Money Transfer Tax (IMTT), a controversial tax, introduced about four years ago, escalated this week, as Finance minister Mthuli Ncube (pictured) fine-tuned his 2023 national budget before presentation next Thursday.

In interviews with chief executive officers (CEOs) and captains of industries this week, businessdigest was told that relief from IMTT would be crucial to save struggling businesses already saddled with many statutory obligations.

Under the IMTT, government charges 2% tax on transactions worth between ZW$10 000 and ZW$500 000.

The tax was introduced after government, facing a slowdown in revenues inflows due to a prolonged economic crisis, came up with a plan to draft the informal sector into the tax system.

Key taxes like Pay as You Earn (Paye) and corporate tax had suffered following the closure of many firms, as Zimbabwe’s economy haemorrhaged from 2000.

The International Monetary Fund (IMF) now estimates that about 60% of the country’s gross domestic product (GDP) is in the informal sector, which government has struggled to tax.

IMTT contributed 8,83% to total fiscal revenues during the third quarter ended September 30, 2022, according to Zimbabwe Revenue Authority (Zimra) data.

This makes it a vital cog in funding government operations, which authorities have been reluctant to review even as pressure mounted.

The IMTT’s third quarter performance was a forecast busting, according to Zimra, which said it was 3% ahead of targets.

From the Zimbabwe Congress of Trade Unions (ZCTU), farmers unions and heads of the country’s biggest companies, the need to repeal IMTT was loud.

“Any move that burdens the worker must be reversed,” said Japhet Moyo secretary-general at ZCTU.

“Workers, who are also consumers, are most affected by the tax. Businesses simply pass on the cost to them. It must be removed,” the ZCTU official said.

Gloria Zvaravanhu, managing director at Old Mutual, said the tax was exerting pressures on insurance firms.

“When someone is paying their insurance premiums, they are not subject to that IMTT,” Zvaravanhu told businessdigest.

“What we would want as an industry is to say that when we also pay the claim, because we are paying out of a pool of savings, we would also want that exemption to come through,” she said.