ZFU frets over 2% money transfer tax

Source: ZFU frets over 2% money transfer tax -Newsday Zimbabwe

THE Zimbabwe Farmers Union (ZFU) has called on government to reduce the intermediated money transfer tax (IMMT) to less than 1% amid concerns that it increased the cost of doing business and discouraged investments in agriculture.

Under the IMMT, introduced under SI 205 of 2018, two cents per dollar tax is added to transactions between $10 and $500 000 in order to increase government revenues and lower its borrowing, specifically via the issuance of Treasury Bills and a Reserve Bank of Zimbabwe (RBZ) overdraft facility.

This is coming at a time when access to finance by farmers remains depressed as they lack collateral that financial institutions demand.

In its 2023 budget submissions, the ZFU said the 2% tax significantly reduced the income of farmers since most payments are received via electronic transfers.

“It adds to the cost of transacting already being charged by financial institutions. This increases the cost of doing business and discourages investment in agriculture. It is, therefore, recommended that this be reversed or revised to less than 1%,” ZFU said

The farmers’ union added that government is already taxing financial institutions, so taxing members of the public for the same transaction implies double taxation.

Last month, there were fresh calls by the civil society who put forth arguments that Zimbabweans were suffering from a regressive tax system, and that the IMMT charge was the highest in Africa.

ZFU argued that to ease the burden on farmers, there was need to improve the agricultural financial markets, access to finance as well as financial needs by farmers.

A survey by Technoserve  in 2015 shows  that 47% of farmers had no access to borrowings, largely due to lack of collateral.

“The government-guaranteed National Enhanced Agriculture Productivity Scheme, (NEAPS) has helped to bridge the agriculture finance gap, yet the finance gap persists. Despite the government support, most farmers are not in these schemes especially for non-eligible crops and livestock enterprises, for example, macadamia nuts, and pecan nuts. There is, therefore, a need to increase the range of crops and livestock eligible under the government support schemes.” ZFU added.

The union added that the Agricultural Finance Corporation (AFC) needed to be capitalised to provide medium to long term financing for agriculture.

It also pushed for the improvement of security of tenure to drive efficiency in land and improve credit markets.

ZFU said the lack of security of tenure, which has been an inherent part of Zimbabwe’s land reform programme, had led to underutilisation of land, which has translated into reduced agricultural output, reduced supply of industrial feedstock, a decline in agricultural exports, and fewer investments on farmland.

“Weak tenure security also means that banks are unwilling to lend to many farmers. Credit is important for agricultural productivity and is an important source of resilience. Developing security of tenure requires creating a comprehensive land administration system,” ZFU noted.