Zimbabwe hikes taxes on electronic forex transactions
Zimbabwe has increased taxes on electronic foreign currency transactions, including ATM withdrawals and payments, as part of several measures President Emmerson Mnangagwa has initiated to try to address the country’s economic decline.
The Southern African country’s economic crisis has deepened, with increasing inflation and the Zimdollar continuing to lose ground.
Companies have not been able to raise foreign currency to settle international obligations and this has impacted quality of service.
In a position paper to the Reserve Bank of Zimbabwe and the Finance Ministry on Monday, the Zimbabwe Chamber of Commerce said, “players within the telecommunications sector are seeking acknowledgement from the central bank to the reality that internet is wholly imported” into Zimbabwe.
They want the central bank to allocate them “more access to foreign currency on the auction system” which formulates the government’s official market for foreign exchange for companies.
However, an ongoing backlog has rendered companies unable to speedily access their allotted foreign currency.
This has forced Mnangagwa to implement economic measures, which include ensuring that companies access the foreign currency allotted to them on the weekly auction market within 14 days.
He said on Saturday: “Government is with immediate effect putting in place a differential taxation system for the Intermediated Money Transfer Tax. 2% would continue to apply to local currency transfers and all domestic foreign currency transfers to attract the IMTT of 4%.”
Mnangagwa hopes that tax differentiation foreign currency transactions would make local currency payments more cost effective.
The government has also increased levies applied to ATM withdrawals. “There is preference to withdraw foreign currency for transaction purposes, thereby undermining IMTT collections, given that cash withdrawals are not liable to IMTT,” reads an official notification.
Other measures include suspension of banks’ lending services, and compensating depositors who incurred losses when Zimbabwe switched from the US Dollar as sole currency to the current multiple currency system.