News / Local
Stanchart in eye of storm over Mthuli Ncube tax
17 Dec 2020 at 01:52hrs | Views
Standard Chartered Bank Zimbabwe has been criticised for its plans to unilaterally recover from customers uncollected transaction taxes, dating back two years, in just three months.
For unknown reasons, Stanchart did not collect the Intermediated Money Transfer Tax (IMTT) popularly known as the 2 percent tax, for ZimSwitch and online banking done by its clients between November 1, 2018 and November 1, 2020.
The bank now intends to collect those taxes from customers within a period of three months, which is seen as a crippling inconvenience to both individual and corporate customers' cash flows at a time everyone is battling to recover from the adverse effects of the Covid-19 pandemic.
Interestingly, the bank could deduct other service charges due to it but "ignored" the 2 percent tax that should be remitted to fiscal authorities through the Zimbabwe Revenue Authority (ZIMRA). The IMTT was introduced in Zimbabwe in January 2003.
The tax is collected on financial transactions which happen through transfers such as direct debits, online transfers, mobile money transfers, supplier payments, loan transactions, interbank transactions and local currency transfers subject to specified exemptions.
Until October 12, 2018, IMTT was levied at the rate of $0,05 per transaction but with effect from October 13, 2018, IMTT is calculated at the rate of 2 percent on every dollar or part thereof transacted subject to certain limits.
A financial institution concerned is obligated to deduct an intermediated money transfer tax on each such transaction and remit it to the ZIMRA Commissioner General not later than the tenth day of the month following the month in which the transaction in respect of which the tax is payable was effected.
However, this was not the case with Stanchart for Zimswitch and online banking. A letter to its customers from the bank's head of retail banking Lucas Chirume reads:
"Please be advised we shall be recovering uncollected 2 percent IMTT for Zimswitch and online banking transactions done from your account between 1 November 2018 to 1 November 2020.
"No action shall be required from you to prompt the recovery of the above mentioned charges which shall commence from the 27 of November 2020. Processing shall be done over a period of three months depending on the amount until we have fully recovered. "Kindly accept our sincere apologies for the inconvenience this process may cause."
The bank has not provided any further clarification on the amount to be recovered or the reasons behind its failure to deduct the 2 percent tax on the said transactions. Some customers are dismayed with the bank over its actions which they said were an inconvenience and affecting their cash flows.
"I personally understand the law requires I should pay the 2 percent tax and never refused to do so. My issue is the bank wants to burden me by deducting the tax in three months, something they should have done in a period of two years. Should I suffer over the bank's inefficiencies? Someone slept on their job," said the bank's client who preferred anonymity.
In an interview, Pan African Chamber of Commerce board member and National Business Council of Zimbabwe president Langton Mabhanga said the bank was liable and its actions should not affect both individual and businesses' cash flows.
"It is surprising how they managed to escape this all this time but still could deduct service charges. Whatever actions they take, must not affect the business community's cashflows or individual clients because they are not at fault.
"It will be interesting to see how monetary authorities handle this and if there are other agents who are not deducting this tax because this was effected on all transactions not only those on mobile money platforms," he said.
Head corporate affairs and brand and marketing Lillian Hapanyengwi, however, said the recovery would be done in a way that will not inconvenience customers.
She said: "We are aware of the issue which has been rectified going forward and have engaged our clients directly to express our sincere apologies for this inconvenience. "We will ensure that the tax is recovered over a period that will cause minimal inconvenience to our customers. Standard Chartered takes the law and regulations very seriously in all the markets we operate in."
According to the Income Tax Act, a financial institution that has paid the IMTT may recover the tax from either the person whose account the transaction was effected or from both or any of them in such proportions as it may determine, either by debiting the person's account operated with it or in any other manner in all respects as if the amount of the tax were a fee, or a charge levied by the financial institution in the course of its business.
The Act also highlights that a financial institution that fails to pay the Commissioner any IMTT shall be liable to pay, in addition to the tax a further amount equal to 15 percent of the unpaid tax.
Independent tax consultant Learnmore Nyamudzanga said while the bank wants to comply with the laws and regulations, it was also crucial to come up with a more sustainable payment plan that does not disadvantage stakeholders.
"The challenge here is people did not refuse to pay the tax but the bank failed to deduct it. The law also allows recovery of the unpaid taxes, which is the stage at hand.
"What is now crucial is for the bank to negotiate with its customers to come up with a payment plan that does not disadvantage anyone because the money they seek to recover now covers a very long period. "Banks function as agents that collect the tax and remit it to the (ZIMRA) Commissioner. In this case the bank failed to do their job as an agent tasked to collect taxes on behalf of ZIMRA," he said.
Responding to questions from this publication, ZIMRA head corporate communications Mr Francis Chimanda indicated the authority was constantly holding awareness with financial institutions on their tax obligations.
"ZIMRA also makes follow ups on a monthly basis when IMTT becomes due, as a way of reminding all financial institutions of the due date of payment of IMTT. In addition, ZIMRA has carried out tax audits on all the financial institutions to verify if they were correctly accounting for IMTT.
"Besides the follow ups, the workshops and the audits ZIMRA also encourages all taxpayers including financial institutions to make voluntary disclosures of any tax irregularities they may be aware of and pay the tax that was not correctly accounted for.
"The bank may have been paying IMTT on all other transactions but may have omitted to deduct and pay IMTT on Zimswitch and online banking transactions for the period 1 November 2018 to 1 November 2020.
"It is apparent that the bank realised that these transactions are subject to IMTT after being audited, or after noting the anomaly on their own. Once the anomaly is noted, the bank is required to pay the IMTT due. The reason for not deducting IMTT on the two types of transactions may be because the bank failed to correctly interpret the law regarding which transactions are subject to IMTT," he said.
For unknown reasons, Stanchart did not collect the Intermediated Money Transfer Tax (IMTT) popularly known as the 2 percent tax, for ZimSwitch and online banking done by its clients between November 1, 2018 and November 1, 2020.
The bank now intends to collect those taxes from customers within a period of three months, which is seen as a crippling inconvenience to both individual and corporate customers' cash flows at a time everyone is battling to recover from the adverse effects of the Covid-19 pandemic.
Interestingly, the bank could deduct other service charges due to it but "ignored" the 2 percent tax that should be remitted to fiscal authorities through the Zimbabwe Revenue Authority (ZIMRA). The IMTT was introduced in Zimbabwe in January 2003.
The tax is collected on financial transactions which happen through transfers such as direct debits, online transfers, mobile money transfers, supplier payments, loan transactions, interbank transactions and local currency transfers subject to specified exemptions.
Until October 12, 2018, IMTT was levied at the rate of $0,05 per transaction but with effect from October 13, 2018, IMTT is calculated at the rate of 2 percent on every dollar or part thereof transacted subject to certain limits.
A financial institution concerned is obligated to deduct an intermediated money transfer tax on each such transaction and remit it to the ZIMRA Commissioner General not later than the tenth day of the month following the month in which the transaction in respect of which the tax is payable was effected.
However, this was not the case with Stanchart for Zimswitch and online banking. A letter to its customers from the bank's head of retail banking Lucas Chirume reads:
"Please be advised we shall be recovering uncollected 2 percent IMTT for Zimswitch and online banking transactions done from your account between 1 November 2018 to 1 November 2020.
"No action shall be required from you to prompt the recovery of the above mentioned charges which shall commence from the 27 of November 2020. Processing shall be done over a period of three months depending on the amount until we have fully recovered. "Kindly accept our sincere apologies for the inconvenience this process may cause."
The bank has not provided any further clarification on the amount to be recovered or the reasons behind its failure to deduct the 2 percent tax on the said transactions. Some customers are dismayed with the bank over its actions which they said were an inconvenience and affecting their cash flows.
"I personally understand the law requires I should pay the 2 percent tax and never refused to do so. My issue is the bank wants to burden me by deducting the tax in three months, something they should have done in a period of two years. Should I suffer over the bank's inefficiencies? Someone slept on their job," said the bank's client who preferred anonymity.
In an interview, Pan African Chamber of Commerce board member and National Business Council of Zimbabwe president Langton Mabhanga said the bank was liable and its actions should not affect both individual and businesses' cash flows.
"It is surprising how they managed to escape this all this time but still could deduct service charges. Whatever actions they take, must not affect the business community's cashflows or individual clients because they are not at fault.
"It will be interesting to see how monetary authorities handle this and if there are other agents who are not deducting this tax because this was effected on all transactions not only those on mobile money platforms," he said.
Head corporate affairs and brand and marketing Lillian Hapanyengwi, however, said the recovery would be done in a way that will not inconvenience customers.
She said: "We are aware of the issue which has been rectified going forward and have engaged our clients directly to express our sincere apologies for this inconvenience. "We will ensure that the tax is recovered over a period that will cause minimal inconvenience to our customers. Standard Chartered takes the law and regulations very seriously in all the markets we operate in."
According to the Income Tax Act, a financial institution that has paid the IMTT may recover the tax from either the person whose account the transaction was effected or from both or any of them in such proportions as it may determine, either by debiting the person's account operated with it or in any other manner in all respects as if the amount of the tax were a fee, or a charge levied by the financial institution in the course of its business.
The Act also highlights that a financial institution that fails to pay the Commissioner any IMTT shall be liable to pay, in addition to the tax a further amount equal to 15 percent of the unpaid tax.
Independent tax consultant Learnmore Nyamudzanga said while the bank wants to comply with the laws and regulations, it was also crucial to come up with a more sustainable payment plan that does not disadvantage stakeholders.
"The challenge here is people did not refuse to pay the tax but the bank failed to deduct it. The law also allows recovery of the unpaid taxes, which is the stage at hand.
"What is now crucial is for the bank to negotiate with its customers to come up with a payment plan that does not disadvantage anyone because the money they seek to recover now covers a very long period. "Banks function as agents that collect the tax and remit it to the (ZIMRA) Commissioner. In this case the bank failed to do their job as an agent tasked to collect taxes on behalf of ZIMRA," he said.
Responding to questions from this publication, ZIMRA head corporate communications Mr Francis Chimanda indicated the authority was constantly holding awareness with financial institutions on their tax obligations.
"ZIMRA also makes follow ups on a monthly basis when IMTT becomes due, as a way of reminding all financial institutions of the due date of payment of IMTT. In addition, ZIMRA has carried out tax audits on all the financial institutions to verify if they were correctly accounting for IMTT.
"Besides the follow ups, the workshops and the audits ZIMRA also encourages all taxpayers including financial institutions to make voluntary disclosures of any tax irregularities they may be aware of and pay the tax that was not correctly accounted for.
"The bank may have been paying IMTT on all other transactions but may have omitted to deduct and pay IMTT on Zimswitch and online banking transactions for the period 1 November 2018 to 1 November 2020.
"It is apparent that the bank realised that these transactions are subject to IMTT after being audited, or after noting the anomaly on their own. Once the anomaly is noted, the bank is required to pay the IMTT due. The reason for not deducting IMTT on the two types of transactions may be because the bank failed to correctly interpret the law regarding which transactions are subject to IMTT," he said.
Source - the herald
