The decision by Zimbabwean Monetary and Fiscal authorities to review tax for all electronic transactions from 5 cents per transaction to 2 cents per dollar has been largely condemned by the Confederation of Zimbabwe Industries, Economists and the majority of Zimbabweans leading to quick amendments, limiting it to transactions above $10 dollars and above with an upper limit of $10,000 and several other exceptions.
In a letter dated 2 October 2018 CZI president Mr Sifelani Jabangwe wrote to the Minister of Finance warning him of the money tax’s potential negative impact and unintended consequences on the formal sector and now the market is already experiencing massive price increases.
Said CZI president Mr Sifelani Jabangwe : “Weppreciate the advantage of this tax as it is a method of taxing the informal sector and thus widening the tax net. We are very supportive of this approach and would like to recommend some slight modifications to the proposal which will mitigate the potential negative impact on the formal sector of the 2% charge.”
Responding to the question, ‘So how can we mitigate the impact on the formal sector without compromising the ultimate objective of the tax which is to widen the tax net?’ Mr Sifelani Jabangwe said “we believe that this can be effectively mitigated by a cap on the charge. We recommend a cap of USD 2.00 per transaction. This will mitigate the impact on formal business whilst collecting a fair contribution from all users of electronic payment systems.”
While government apologists had quickly started defending the move as a modest cost in trying to raise tax revenue the majority of experts warned Minister Mthuli and further questioned the legality of such a proposal as it was not part of the legislative framework.
State run newspapers commended the new system, saying it now captures the entire previously untaxed $7,5 billion informal sector.
On social Media Tichatonga Nzekete a Zimbabwean Economist working in Namibia urged the new Minister of Finance to quickly acquaint himself with how government policy is implemented.
“You dont collect money from people like you are collecting money for Burial Society” lamented Mr Nzekete.
Eight months ago Steward bank launched Kwenga, a portable POS machine which is specially crafted for Small to Medium Enterprises and on the day of the launch Dr Lance Mambondiani appealed with then Deputy Finance Minister Terrence Mukupe to look into removing the 5c tax on $1 transactions.
Steward Bank had cancelled all bank charges for all transactions less than a dollar through Kwenga and the new proposal to heavily tax electronic transactions will certainly be viewed as retrogressive.