Law Society of Zimbabwe says proposed 2 cents tax is actually 6 cents per dollar

The Law Society of Zimbabwe has called on the government to rescind the 2 cents per dollar transfer tax which it intends to impose on all transactions of $10 and above because the move is not only illegal but also because it actually translates to 6 cents per dollar.

In a statement the Law Society said the imposition of the tax was illegal because the present law under which taxpayers are charged 5 cents per transaction has to be amended first and the proposed tax has to be passed into law.

Finance Minister Mthuli Ncube has already conceded that the new tax will only apply after it has been gazetted.

The Law Society said the new tax flies in the face of the mantra “Zimbabwe is open for business.”

“To demonstrate the unreasonableness of the tax is the debt collection example below:

“When a lawyer sues a debtor and recovers a debt the government will recover 6% tax as follows:

“a) 2% on the payment by debtor into lawyer’s trust account

“b) a further 2% when the lawyer pays to his client and

“c) when the client uses the money to run his business e.g through purchasing raw materials.”

Full statement

On the 1st of October 2018, the Minister of Finance and Economic Development (“The Minister”) announced the upward revision of the Intermediated Money Transfer Tax with immediate effect as follows:

“I hereby review the Intermediated Money Transfer Tax from 5 cents per transaction to 2 cents per dollar transacted, effective 1 October 2018.”

In light of the serious financial and practical implications of the announcement to all enterprise and common persons, there has been a public outcry and calls for the Minister to rescind the announcement. The Law Society of Zimbabwe and its members support the call that the 2 cents per dollar on all transactions be rescinded because amongst other reasons, its imposition is unlawful.

The legal position is that transaction tax lawfully levied in terms of section 36G of the Income Tax Act as read with the 30th Schedule thereof and Section 22G of the Finance Act. Paragraph 2 of the 30th Schedule to the Income Tax Act provides that:

“Whenever a financial institution mediates the transfer of money otherwise than by cheque—

(a) between 2 persons; or

(b) from 1 person to 2 or more persons; or

(c) from 2 or more persons to 1 person;

the financial institution concerned shall pay to the Commissioner an intermediated money transfer tax on each such transaction.”

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