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'Billions of electronic transactions untaxed'

by Staff reporter
19 Oct 2022 at 05:56hrs | Views
AS the use of modern electronic payment systems continues to grow globally, experts say it is critical to increase investment into fiscal tools that enable the country to widen its ability to tax electronic transactions.

By so doing, Zimbabwe can significantly grow the tax revenues the central Government requires, which can be channelled towards development programmes including infrastructure investments and social service delivery.

This comes as the world is increasingly moving towards digitally enabled economies, made more compelling following the outbreak of the Covid-19 pandemic, whose impact put a huge strain on production.

Digital technologies allows businesses, foreign or local, to operate in a country without a physical presence, which poses challenges for traditional taxation and this allows for billions worth of transactions to go untaxed.

The pandemic also widened inequalities and exerted increased pressure on public debt constraints as countries were forced to borrow to meet urgent food security and medication requirements as well as rescue packages for businesses.

Finance and Economic Development Minister Mthuli Ncube introduced the intermediated money transfer tax (IMTT), popularly known as the 2 percent tax, in 2018 in an effort to capture electronic transactions including those executed on mobile money.

He recently said the "Government (finally) extended tax on income generated from trade in electronic services. However, he said there is no clarity on what constitutes trade in electronic services", and proceeded to set parameters of what falls under this category.

Zimbabwe Coalition on Debt and Development (ZIMCODD) head of programmes John Maketo said there was scope to scale up on technology that enables the Treasury to tap into the vast digital payment platforms, which would unlock billions of dollars in additional tax revenues.

The gaming industry is considered an untapped ‘gold field'.

The video game sector is booming and is tipped to keep growing. It is expected to be worth US$321 billion by 2026, according to PwC's Global Entertainment and Media Outlook 2022-26.

Mr Maketo said leveraging technology could help the country track such sectors and collect significant revenue for the benefit of the country.

"Our systems of revenue collection should move with time. There are a lot of companies that are not paying taxes for instance; the gaming industry, billions of dollars are circulating in this industry while we also have other platforms like WhatsApp and Netflix.

"How can we as a country track these and online shops for taxes?

‘‘The e-commerce companies have actually survived on a ‘freemium' yet we could benefit from them," he said adding technology can also be leveraged to enhance the efficiency of tax collection by modernising and streamlining tax collection processes. According to the World Economic Forum, the gaming industry saw millions of new players splashing out on games and consoles during Covid-19 lockdowns as this helped with their mental health.

Zimbabwe Revenue Authority (ZIMRA) commissioner general Regina Chinamasa said the tax authority had already embraced digitalisation in line with growing trends in tax collection processes.

She said the authority was committed to supporting the Government initiatives towards resource mobilisation, as the country moves towards achieving an economic upturn in line with the National Development Strategy (NDS1).

Source - The Herald
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