Do not tax the ZiG out of use

Do not tax the ZiG out of use

Nevanji Munyaradzi Chiondegwa

 

The launch of the new Zimbabwean currency brings about a lot of pertinent issues and a need to relook at the existing policies and practices as the authorities grapple to promote its use and acceptance.

 

The recent clampdown on money changers is good and it does help in the value preservation of the ZiG but I however am of the opinion that it is time the tough talk of government on money changers is also followed by real action on the party of the fiscal and monetary authority to protect the ZiG and promote its use.

 

I have been inundated by questions on why 20% of transactions are attracting 2% IMTT and 80% of transactions are attracting 1%. I have been asked to explain how it promotes the use of the local currency (ZiG) to be charged transaction charges plus 2% IMTT on the total amount transacted adding an extra 7% or so to the total used?

 

Then the new Governor of the Reserve Bank of Zimbabwe, Dr John Mushayavanhu appeared before Parliament and was asked by one Parliamentarian why there is a 2% tax on the ZiG. He was informed that the tax inadvertently promotes the use of USD and also makes cash a COMMODITY. He admitted the same but passed the ball back to the Treasury.

 

To charge 2% on ZiG transactions while its 1% on USD transactions is a BAD POLICY and counter-productive to the acceptance of the ZiG. I urge the fiscal authority to charge the 2% on USD transactions and charge NOTHING on ZiG. That is how a country makes its currency attractive and create demand for it. We need to stop the obsession with the USD.

 

The RBZ and the government are saying ZiG transactions are only 20%, so why not remove the IMTT on the ZiG as a way of promoting it? If the RBZ does not want to flood the market with ZiG cash, why not remove the taxes and exorbitant charges on electronic payments to encourage people to use electronic payments?

 

Government policies must promote its objectives. You can’t say you want a cashless or cash-lite economy while punishing people for using electronic money. You do not promote your own currency by heaping taxes on those using the currency while rewarding those using the USD. Its contrary.

 

As much as the IMTT is a source of revenue for the government, the overall benefits of cutting it or removing it altogether outweigh the market distortions it is creating. It does not need a rocket scientist to tell us why at the end of the ZWL, the ZWL NOTES were HIGHLY VALUED. It was to escaoe the IMTT.

 

The a policy needs ATTENTION. Similarly, the associated bank charges need attention. Banks cannot and must not make money from charging clients but rather from lending out money! People must benefit from banking not suffer a loss.

 

NB: The Governor responded by saying the Minister agreed to adjust the IMTT and will soon make an announcement.