Zimbabwe: High Court annuls intermediated money transfer tax law

ATL-Editor 30 September 2019

Zimbabwe Report from Richard Rukundo, Associate, IBFD

High Court annuls intermediated money transfer tax lawTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public...

On 18 September 2019, the High court of Zimbabwe scrapped the 2{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} transaction tax which was introduced by the government through the Finance (Rate and Incidence of Intermediated Money Transfer Tax) Regulations, 2018 (The Regulations). The Regulations were introduced as a revenue enhancement measure after the 2018 Budget. Given the shortage of cash in the country, most transactions in Zimbabwe are electronic and the government has thus sought to tap into this as a revenue measure.

Highlights of the intermediated money transfer tax lawTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public... include;

–	it is collected by a financial institution whenever it mediates the transfer of money between two or more persons, except transfers by cheques;
–	it applies to transactions of USD 10 and above;
–	transactions above USD 500,000 are charged a flat tax rate of USD 10,000; and
–	exempted transactions are; intra-company transfer of funds including transfer form intermediary accounts, transfer of funds on purchase and sale of equities, transfer of funds on purchase and redemption of money market instruments, transfer of funds for payment of salaries, transfer of funds for payment of taxes, transfer of funds to intermediary accounts for conveyancers, transfer of funds in respect of foreign currency related payments, and transfer of funds by the government.

In its holding, the court found that the Minister of Finance usurped parliament’s powers by introducing the regulations that changed the tax rate in the Finance Act thereby effectively amending the Act.

Court determined that this action undermines the separation of powers principle where the executive through the minister amends a law passed by parliament. Court thus revoked the Regulations and the new tax rates introduced by those Regulations.

Zimbabwe collects a substantial amount of revenue in this tax given that most transactions are online due to shortage of cash in the country.

Categories: FP News

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