Banks pressures Mthuli Ncube to abolish IMTT

Banks are mounting pressure on Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube to abolish the Intermediated Money Transfer Tax (IMTT), arguing that the levy is undermining financial inclusion, discouraging digital payments and slowing economic growth.

In submissions ahead of the Mid-Term Budget Review, expected later this month, banking industry players said the IMTT has become one of the country's biggest structural barriers to financial intermediation, investment and private sector expansion.

The calls come as the government seeks to deepen financial inclusion, widen the tax base and accelerate private sector-led economic growth.

The Bankers Association of Zimbabwe (BAZ) said reducing the IMTT rate from 2% to 1.5% had failed to address the tax's negative impact on businesses and consumers.

"IMTT is a significant hindrance to banking sector growth and fuels informalisation and tax evasion," BAZ said in its submission.

The association proposed either abolishing the tax immediately or introducing a lower, tiered structure that would favour productive sectors, value-chain payments and other strategic economic transactions, while providing a clear roadmap towards its eventual elimination.

According to BAZ, lowering the tax to around 1%, or scrapping it altogether, would encourage businesses and consumers to move away from cash transactions and into the formal banking system, increasing transaction volumes and ultimately broadening the government's tax base.

The association said banks were prepared to support the transition through merchant onboarding, expanding digital payment systems and integrating value chains, but argued that IMTT remains the biggest obstacle to achieving those goals.

"The broad application of IMTT increases the cost of transacting for businesses and consumers, discourages digital financial usage and formalisation, encourages migration toward cash-based and informal transactions, and suppresses transaction volumes," BAZ said.

The bankers warned that declining electronic transaction volumes have weakened the banking sector by reducing deposits, constraining lending to productive sectors and limiting the effectiveness of monetary policy.

"It should therefore be viewed not only as a revenue instrument, but also as a determinant of financial sector depth, formalisation and economic efficiency," the association said.

The Zimbabwe National Chamber of Commerce (ZNCC) also called on Treasury to abolish the tax, arguing that it has become a major impediment to formal economic activity.

"Remove IMTT completely. It will restore digital payments, reduce cascading costs and broaden the VAT and income tax base," ZNCC said.

The chamber said evidence suggests that the tax has reduced electronic payment volumes as businesses increasingly consolidate transactions or revert to cash to minimise tax liabilities.

It argued that the disparity between the size of Zimbabwe's economy and the country's relatively low banking deposits reflects the growing volume of economic activity taking place outside the formal financial system.

Business organisations also urged Treasury to ease the broader tax and regulatory burden, warning that multiple taxes, statutory levies and licensing requirements continue to increase the cost of doing business and discourage formalisation.

BAZ called for a more collaborative approach to tax administration, saying aggressive audits, retrospective tax interpretations and punitive enforcement measures create uncertainty for compliant taxpayers and deter investment.

The association further urged government to repeal provisions limiting the deductibility of management fees and financing costs, arguing that the measures result in economic double taxation and reduce Zimbabwe's attractiveness as an investment destination.

Meanwhile, ZNCC proposed a comprehensive review of the country's tax framework, including consolidating overlapping taxes and statutory levies through a General Laws Amendment Bill to simplify compliance and improve certainty for taxpayers.

The chamber also urged government to address rising public debt, ring-fence resources to clear domestic arrears and cap taxes and levies on fuel at US$0.40 per litre to reduce production costs and improve business competitiveness.