The 2 cents intermediary money transfer tax recently introduced by Government is helping the country to significantly narrow its budget deficit, President Mnangagwa has said.
Responding to questions from delegates at the 3rd annual Public Sector Audit Conference in Harare yesterday, the President said the tax was critical in transforming the economy.
Delegates had argued that the tax was contrary to the ease of doing business push.
President Mnangagwa responded: “I do not think it is a hindrance. It has helped us a lot now to narrow the deficit gap in our economy.
“Yes, initially when it was articulated by the Minister of Finance and Economic Development (Professor Mthuli Ncube) it had overlooked a lot of people who in our view ought to have been left out. He did his best to re-explain it and move out from compliance many categories whom we think would cause a prohibitive manner in doing business.”
Under the new tax, transactions between $10 and $500 000 attract a 2 cents per dollar tax in measures announced by Prof Ncube to raise revenues and reduce Government borrowing, especially through the issuance of Treasury Bills and a Reserve Bank of Zimbabwe (RBZ) overdraft facility.
Statistics show the budget deficit during the first nine months of the year stood at $2,5 billion.
President Mnangagwa said the tax would be reviewed continuously.
“What is left can still be improved on if you put a good argument,” he said.
“For you to put a good argument, you must first of all have something that you are arguing against. Before we do it, we cannot argue. Now that it is there, you have a case. Come forward with it and argue that it is not good and we also have our case that we have put a tax. This is democracy. The best argument of the day will succeed, but for now, it is there.”
He added: “The Minister of Finance will be making a budget statement soon. I think it is before the end of this month. I can safely say he will also look at that in order to improve. I don’t know whether it will be your position or mine.”
Reduced Government borrowing from the local market will allow the manufacturing sector to access funds from banks for retooling and modernisation as the economy gears to ramp up production.
The new tax does not apply to eight types of transactions, namely inter-company transfer of funds, including transfers of intermediary accounts; transfer of funds on sale and purchase of equities; transfer of funds on purchase and redemption of money market instruments; transfer of funds for payment of salaries; and for payment of taxes. It also does not apply to transfer of funds to intermediary accounts, transfer of funds in respect of foreign currency-related payments and transfer of funds by Government.