THE Bankers Association of Zimbabwe (Baz) wants Treasury to make all corporate tax payable in local currency in a raft of fiscal proposals submitted ahead of the 2024 national budget presentation tomorrow.
In its budget submissions, Baz suggested that all corporate tax be payable in local currency and that levy on domestic remittances be reviewed to encourage customers to continuously use the formal banking channels.
This comes as Finance Act No 7 of 2021 introduced an obligation for companies to pay their corporate and income taxes according to the currency used.
While taxable income is statutorily determined through co-mingling currencies (gross income minus exemptions minus allowed deductions), Baz said splitting the tax liability based on gross receipts forced tax agents to make many assumptions that could not be uniform across taxpayers.
“The Act itself does not clearly determine how such a split must be done and Zimra has instead asked taxpayers to develop their own methodology for the splitting of the liability. This defeats the equity principle which must be a fundamental element in the administration of tax issues,” Baz said.
“Additionally, the demand for payment of corporate tax in foreign currency also undermines the wide usage of the local currency and does not promote confidence in the Zimdollar. We recommend that all corporate taxes be payable in local currency.”
Baz highlighted that the intermediated money transfer tax being levied on domestic remittances increased the cost of the service which is eventually passed on to the final consumer.
This has, Baz continued, produced a negative consequence which might discourage use of the formal channels to send and receive money.
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“We, therefore, propose that the levy on domestic remittances be reviewed to encourage customers to continuously use the formal banking channels,” Baz said.
Baz also recommended that the 2% levy on cash withdrawal of US$1 000 and above, under Statutory Instrument 96 of 2022, be reduced or removed.
In the absence of that, Baz warned, the market would avoid depositing US dollars into the banking system to evade tax.
The effect, the association warned, would lead to increased cash transactions outside banking channels.
Baz also lobbied for the exemption on VAT charged on importation of the e-payment infrastructure that promotes digital transformation such as point of sale terminals, self-service tablets, automated teller machines, and self-service booths.
Baz said the exemption would reduce the cost of importing the equipment and thus reduce what banks passed on to the customer.
Further, Baz recommended multi-sector stakeholder consultations.
“Banking sector operations thrive when there is certainty and stability at policy level. There have been numerous policy changes in recent years which have impacted negatively on the financial sector. We recommend multi-sector stakeholder consultations which result in policy consensus,” Baz said.
“Zimbabwe should finalise the arrears clearance and debt relief strategies by engaging international financial institutions to negotiate and where possible restructure the country’s telegraphic transfers on domestic remittances.”
Baz also pushed for the introduction of incentives for local tertiary institutions and service providers to develop in-house solutions as most vendors of digital solutions were foreign.
Consequently, banks are forced to use foreign currency in purchasing solutions.
