Treasury has extended the Intermediated Money Transfer Tax,
more commonly known as the 2 percent tax, to foreign currency transactions.
Earlier this year, Government legalised the use of the
United States to transact alongside the local currency in a move aimed to
unburdening the public in doing transactions following the emergence of
Covid-19.
Announcing new revenue measures in the Mid-Term Budget
Review yesterday, Finance and Economic Development Professor Minister Mthuli
Ncube said the move to add hard currency transactions on IMTT was due to the
preferred use of hard currency by most businesses, which was compromising the
tax head.
“Current legislation exempts the transfer of money into and
from nostro foreign currency accounts from intermediated money transfer tax.
“Following the legalised use of foreign currency in
domestic trade, there has been an upsurge in electronic transfers of foreign
currency for transaction purposes.
“The current exemption has, thus, created an unfair
advantage for taxpayers transacting in foreign currency, thereby raising equity
considerations,” said the Finance Minister.
“Furthermore, the preference for foreign currency by most
business has undermined the revenue generating capacity for IMTT.
“I, therefore, propose to extend Intermediated Money
Transfer Tax to cover foreign currency transactions, with effect from 1 August
2020.
“For the avoidance of doubt, transactions for organisations
accredited in terms of the Privileges and Immunities Act (Chapter 3:03) remain
exempt from IMTT.”
The Intermediated Money Transfer Tax came into effect on
October 13, 2018 after it was gazetted in Statutory Instrument 205 of 2018.
Last November, Government increased the minimum taxable
amounts for IMTT to $100 from $20 per transaction for individuals as it sought
to ease the burden on low income earners.
Funds collected from the tax have been used to fund
emergency programmes as well as other critical social programmes.
Prof Ncube said the tax had managed to force other sectors,
which generally escaped paying tax, from making a contribution to the fiscus.
“In order to cushion low income earners and high volume
businesses, I propose to review the tax-free threshold from the current $20 to
$100 and the maximum tax payable per transaction by corporates from the current
$15 000 to $25 000 on transactions with values exceeding $1 250 000, with
effect from 1 January 2020,” he said at the time.
Currently funds generated from the tax head have been going
towards mitigating the effects of the Covid-19 pandemic.
“Resources from the 2 percent Intermediated Money Transfer
Tax (IMTT) were also ring fenced and channelled towards Covid-19 related
mitigatory expenditures,” said Professor Ncube yesterday. Chronicle
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