In an editorial article for The Herald today, Finance Minister Mthuli Ncube said the government has raised $449 Million from the 2 percent tax introduced in October 2018.
The minister was announcing that $100 million of that money has been allocated to cyclone Idai relief efforts.
One of the key elements of our strategy to get our finances back on track was the Intermediated Money Transfer Tax (IMTT), popularly referred to as the 2 percent Tax, which we introduced six months ago in October 2018, to replace the previous flat tax of 5 cents per transaction.
The purpose of this tax was twofold. First, it was intended that the 2 percent tax would raise significant revenue to be used to balance the budget and finance various priority development programmes. The tax’s performance in this regard has exceeded all expectations, and to date, we have collected $449 million. This money has helped to cut the monthly budget, for example from a US$242 million deficit in November to a surplus of US$733 million in December, and has also gone towards key projects such as dualisation of Norton strip of the Harare-Bulawayo Highway.
The second goal for this tax was to give government the ability to fund inescapable and unforeseen expenditures, without recourse to debt creating instruments such as Treasury Bills, through the establishment of a dedicated and ring-fenced fund.
We are well aware that we live in a region in which natural disasters are becoming sadly ever more common, and that therefore, government must have the ability to respond to such events without creating further debt.
The ongoing Cyclone Idai disaster is one such event.
The tax has been fairly unpopular with Zimbabweans but Ncube said today that though unpopular, it’s introduction was the right thing to do. He said without it, Zimbabwe wouldn’t be able to “cut the [budget] deficit, invest in vital infrastructure, and put aside a sizeable sum that is being used to mitigate the effects of Cyclone Idai.”
More: The Herald