Marvelous Tapera 
The intermediated money transfer tax (IMTT) can be said to be one of the not so celebrated measures introduced by the revenue authorities.
Although IMTT has been in existence since 2002, its revision in the year 2018 to two percent on every transaction from US$0.05 on every transaction almost seemed to many as if the tax was being introduced for the first time.
The IMTT is a tax charged in terms of the Income Tax Act and it is the responsibility of the financial institution to collect it.
Like its name suggests, it is a tax that arises whenever there is an intermediary service in the transfer of money. It is levied on the transfer of money from one person to another at the rates specified by law by the financial institution.
Financial institution refers to banks and money transfer agents. The responsibility to administer the IMTT rests on financial institutions and money transfer agencies who are intermediaries in the transfer of money, meaning they must administer IMTT.
That being the case, the government has of late displayed much interest in the IMTT as it is a simple revenue to collect and is based on transactions, by doubling it from the previous two percent to four percent.
In the current year, the IMTT rate for US$ transactions only was doubled from two percent to four percent on every transaction. This leaves the IMTT at two percent for ZWL and four percent on US$ transactions.
The consequential effect of this law rests on businesses. The two percent itself is a huge cost to business and increasing it to four percent on the US$ exacerbates the situation. Business is lamenting the four percent US$ charge that comes as an additional cost of doing business as it is added over and above the general charges that are charged by banks and money transfer agencies on every transaction.
The reason why the four percent has become an issue for business is the fact that most transactions are now denominated in foreign currency, and we also do not see the reason why the government should collect four percent when foreign transactions have become more popular in business transactions.
Even more so, the fact that the two percent is taxed on capital, which is not the general design of the tax law, is of huge concern. IMTT is charged on capital, which means before a company can transact, it is paying the tax upfront from their own money.
The argument at this point could be that the need for US$ is very high among businesses who seem to be transacting much in foreign currency, the same also seems to be a need for the government to benefit the fiscus.
To that end therefore, as a way of circumventing the effect of the IMTT charge, businesses are tending to pass on these costs to consumers, thereby driving up inflation.
Another way that businesses are seeking relief from the IMTT is to reduce the number of times transfers are made directly to and from their bank accounts by having third-party arrangements where a customer will be asked to pay money directly to the business’ suppliers’ bank accounts.
This reduces transactional costs on the side of the businesses since there will not be need for them to first collect the amount from their customers and then transfer the money to the suppliers.
Looking at the perspective of the money transfer intermediaries, again, implementing this way of circumventing IMTT may not be feasible or rather may call for inventing new structures, which are subject to regulations for financial services providers. The assignment of income that has accrued to a taxpayer to another third party is popular in business to reduce transactional costs.
This arrangement has an effect of avoiding payment of IMTT in that where IMTT would have otherwise been levied twice i.e., on the transfer from the debtor to creditor and on the transfer from creditor to its suppliers, the IMTT is reduced by assigning the debtor to make payment directly to its suppliers.
IMTT is a tax levied on the transfer of money ― it does not concern itself with the notional tax where money hasn’t been transferred.
Case law has also discussed the aspect that in instances where tax avoidance could be a probable cause in some transactions, the Commissioner should be careful not to wear or rather cannot wear the mantle of a business advisor in adjudicating upon a taxpayer’s business affairs and how exactly it ought to run some of its business affairs.
Which means before a company can transact it is paying the government. This is a huge cost to the country and businesses the most. This could also have an effect on investors who may be alienated by the idea of investing in a country where before you can make some income or profits on your investment, your capital in already being taxed.
This IMTT and other taxes have compounded an onerous tax administration, which has pushed Zimbabwe into the ranks of highly-taxed jurisdictions.
While completely removing the tax that has been helping revenue growth for the government would seem over-ambitious, we are appealing to the government to review the rate downwards on US$ transactions, as the country is slowly falling back into being a multi-currency regime.
The four percent IMTT is huge and is akin to interest on a person’s own capital.
Tapera is the founder of Tax Matrix (Pvt) Ltd and the chief executive of Matrix Tax School. He writes in his personal capacity.
