On the back of increasing criticism from labour and civil rights organisations, the government of Zimbabwe has reviewed the recently introduced 2 cents per dollar tax on mobile money and electronic transactions.

Less than a week after hiking the tax rate on mobile wallet transactions from 5 cents per transaction to 2 cents on each dollar transacted, Finance Minister Mthuli Ncube announced adjustments.

"The 2 cents per dollar tax will apply to transactions of US$10 and above only. Transactions below US$10 will be exempt from this tax," said Ncube. "There is a cap of US$10000 on the amount of tax to be paid. This implies that transfers above US$500 000 will attract a flat tax of US$10000."

According to the finance ministry transactions such as intra-company transfer of funds, the purchase of equities, redemption of money market instruments and transfer of money for payment of salaries will be exempt from the 2 cents per dollar mobile money and electronic transactions levy.

Other transactions such as tax payments and transfer of funds by government are also exempt.

Observers have said that the tax is targeted at the informal economy which is booming in Zimbabwe as investments wilt.

However, the Law Society of Zimbabwe said the tax is illegal and urged government to reverse it.

The organisation stated, "The Law Society of Zimbabwe and its members support the call that the 2 cents per dollar tax on all transactions be rescinded because, among other reasons, its imposition is unlawful."

It cited violations to provisions under the Finance Act, highlighting that "the proper procedure for the amendment of a law (from the previous 5 cents per transaction) is through Parliament as required by the constitution and not through a policy statement".

It added that there was no due process followed regarding commencement of the levy.

The Zimbabwe Congress of Trade Unions (ZCTU) added : "Taxing the formerly financially excluded poor people, especially in rural and urban communities, is highly retrogressive and regressive."