Mobile money restrictions weigh on intermediated money transfer tax

Author Name
Respect Gwenzi
Author
Analysis 10 months ago

Harare – Tax collected from intermediated money transfers came in at ZWL3.91 billion, 33% below the target of ZWL5.86 billion set for the quarter ended 30 September 2020 by the Zimbabwe revenue authority (ZIMRA) due to the restrictions put on mobile money operators by the government following allegations that they were undermining and devaluing the Zimbabwean dollar.

In the revenue performance report for the third quarter of 2020, ZIMRA vice-chairperson, Josephine Matambo revealed that monetary policy interventions in the electronic money sector, enacted to salvage the economy and the local currency weighed heavy on tax collections.

“The Intermediated Money Transfer Tax lost its momentum, missing the target of ZW$5,860,000,000 by ZW$1,947,176,596.12 (32.23%) and contributing only 6.86% to total revenue for the quarter. This was partly due to the monetary policy interventions introduced to harness the local currency depreciation that was threatening economic stability,” she said.

The government in October 2018 introduced a 2% tax off most electronic transactions with the aim of closing the budget deficit.

This tax contributed over 12% of all revenue collected during the Q1 2020 and over 11% during Q2 2020 with the main contributor being EcoCash under Cassava Smartech which controls over 98% of the mobile money market.

However, since the placement of restrictions by government in August this year only allowing users a daily transaction limit of ZWL5000 per day EcoCash’s revenue contribution to the Cassava group fell from 74% to 64% and along with the revenue, its tax contribution.

Furthermore, according to POTRAZ active mobile money subscriptions dropped by almost 3% in the second quarter of this year which represents over 152 000 mobile money accounts as users are now only allowed one account.

ZIMRA has set a target of ZWD172 billion for this year expected to come from increased productivity with the opening up of more business sectors in the economy but if things remain the same, the mobile money sector will not be contributing much to that figure.

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