ZFU concerned over 2% money transfer tax -Newsday Zimbabwe

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The Zimbabwe Farmers Union (ZFU) has called on the government to reduce the Intermediary Money Transfer Tax (IMMT) to less than 1%, fearing it will increase the cost of doing business and discourage investment in agriculture.

Under the IMMT, introduced as 2018’s SI 205, a tax of two cents on the dollar is added to transactions between $10 and $500,000 to increase government revenue and reduce government borrowing, including through issuance of treasury bills and a Reserve Bank of Zimbabwe (RBZ) overdraft facility.

This comes at a time when farmers’ access to finance remains depressed as they lack collateral required by financial institutions.

In its 2023 budget proposals, the ZFU said the 2% tax significantly reduces farmers’ income since most payments are received by wire transfer.

“This is in addition to the cost of transactions already 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%,” said ZFU.

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

Last month there were fresh calls from civil society who advanced arguments that Zimbabweans were suffering from a regressive tax system and that the IMMT burden was the highest in Africa.

ZFU argued that to ease the burden on farmers, it was necessary to improve agricultural financial markets, access to finance as well as farmers’ financial needs.

A survey conducted by Technoserve in 2015 shows that 47% of farmers did not have access to loans, largely due to lack of collateral.

“The government-backed National Agricultural Productivity Enhancement Program (NEAPS) has helped close the financing gap for agriculture, but the financing gap persists. Despite government support, most farmers do not participate in these programs, especially for non-eligible crops and livestock enterprises, for example, macadamia nuts and pecans. There is therefore a need to expand the range of crops and livestock eligible for government support programs. ZFU added.

The union added that the Agricultural Finance Corporation (AFC) needed to be capitalized to provide medium and long term finance to agriculture.

He also pushed for improved tenure security to increase land efficiency and improve credit markets.

ZFU said the lack of secure tenure, which is an integral part of Zimbabwe’s land reform program, has led to underutilization of land, which has resulted in declining agricultural production, reduced the supply of industrial raw materials, a decline in agricultural exports and a decrease in investments in agricultural land.

“Low land 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. The development of security of tenure requires the creation of a comprehensive system of land administration,” ZFU noted.

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