The 2 cents tax comes into effect today

Mthuli Ncube

The Intermediated Money Transfer Tax, now commonly known as 2 cents tax, announced by Government last week comes into effect today after it was gazetted yesterday.

This tax was gazetted in Statutory Instrument 205 of 2018 published in the Government Gazette.

The new tax has been introduced by way of amendments to section 22G of the Finance Act (Chapter 23:04) and the Thirteenth Schedule of the Income Tax Act (Chapter 23:06).

Reads part of the Statutory Instrument:

“With effect from the day after the promulgation of these regulations, the intermediated money transfer tax chargeable in terms of section 36 G of the Taxes Act shall be calculated at the rate of zero comma zero two (0,02) United States dollars on every dollar transacted for each transaction on which the tax is payable: provided that if a single transaction on which the tax is payable is equivalent to or exceeds five hundred thousand ($500 000) United States dollars, a flat intermediated money transfer tax of ten thousand ($10 000) United States dollars shall be chargeable on such transaction.”

Finance and Economic Development Minister Professor Mthuli Ncube proposed the tax last week, saying it sought to expand Government’s capacity for capital funding and retooling of the manufacturing sector.

Last Friday, he announced upper and lower limits for the Intermediary Money Transfer Tax and types of transactions to which the tax would not apply.

The Statutory Instrument extends the types of transactions the tax will not apply to.

According to SI 205 of 2018, “transaction on which the tax is payable does not include any of the following transactions — the transfer of money for the purchase or sale of marketable securities; the transfer of money for the purchase or redemption of money market instruments; the transfer of money on payment of remuneration; the transfer of money to or from the Zimbabwe Revenue Authority (ZIMRA) for the payment or refund of any tax, duty or other charges, and the intra-corporate transfer of money between the Treasury account and any trading account held in the name of the same company.

“The transfer of money from (but not into) specified trust accounts; the transfer of money into and from nostro foreign currency accounts; the transfer of money by Government from the Consolidated Revenue Fund or from funds established in terms of section 18 of the Public Finance Management Act; the transfer of money to any pension fund or to beneficiaries of such a fund; the transfer of money for the

procurement, production or sale (wholesale or retail) of a petroleum product by a petroleum company licensed in terms of Part IV of the Petroleum Act (Chapter 13:22), and the transfer of money involving a transaction other than one mentioned in the foregoing paragraphs, if the value of transaction is $10 United States dollars or below.”

Since its proposal, the Intermediated Money Transfer Tax has received mixed reactions from different sections of society, with some unscrupulous retailers moving on to increase prices over the last few days despite the tax having not come into effect.

Earlier in the week, President Emmerson Mnangagwa said the Intermediary Money Transfer Tax would be implemented as it was critical in transforming the economy, which has suffered from two decades of stagnation.

The President said the tax was not designed to hurt ordinary people and companies, but to help the manufacturing sector get funds for retooling and modernisation, as the economy gears to ramp up production.

He said there was room for the tax to be refined going forward if suggestions were proffered, to create a win-win situation for individuals and companies on one hand, and the economy on the other.