Government Reconsiders Tax Hike on US Dollar Transactions

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HARARE – The government has expressed regret over its decision to increase the intermediated money transfer tax (IMTT) rate on US dollar transactions to 2%, citing concerns that it may hinder financial inclusion and discourage electronic transactions.

Speaking in Parliament’s question time, Deputy Minister of Finance, Kudakwashe Mnangagwa, acknowledged that the move may have been a “social and economic experiment” and promised to review the policy based on its impact.

Mnangagwa stated, “Increasing the transaction cost does, indeed, dissuade the general populace from transacting electronically, but this is something we have had to deeply introspect upon trying to balance the need to collect revenue versus the effort of allowing everybody to be financially included.”

Corban Madzivanyika, a Mbizo member of Parliament representing the Citizens Coalition for Change, raised concerns over the government’s decision to increase the IMTT on US dollar transactions. He questioned the logic behind this move and proposed reducing the tax on Zimbabwe Gold (ZiG) transactions to stimulate demand.

In response, Deputy Minister of Finance Kudakwashe Mnangagwa acknowledged the concerns, emphasizing that while revenue collection is currently the priority, the government will closely monitor the impact on financial inclusion and electronic transactions. He hinted that a review of the policy might be considered if necessary, showing a willingness to adapt the approach based on its effects.

The IMTT hike, aimed at generating additional revenue, has faced criticism from Parliament members and business leaders, who argue that it will increase the cumulative tax burden and discourage electronic transactions.

Mnangagwa stated that while revenue collection is a priority, the government will closely monitor the impact on financial inclusion and electronic transactions, and consider a review if necessary.

The IMTT has been a significant revenue source since its introduction in 2018, but the government’s willingness to reconsider the tax hike indicates a commitment to balancing revenue generation with promoting financial inclusion and electronic transactions. The situation will be closely monitored moving forward.

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