'Mthuli Ncube's transaction tax needs more tweaking'

By Staff reporter | 18 Oct 2018 at 15:07hrs
Mthuli Ncube
TREASURY should add exemptions to the intermediated money transfer tax, which it announced last week, an expert has said.

Last week, Finance minister Mthuli Ncube announced exemptions to the tax which came into effect on Saturday.

Transfer of funds for salaries, the purchase and sale of equities as well as foreign currency related payments are among those excluded from the tax.

"Exempt medical aid contributions and medical expenses, the spirit of tax law has always been to exempt these expenses," Marvellous Tapera said while making a presentation at TaxMatrix's on-going Tax and Business Interface Week.

"Treasury should also exempt benefit fund contributions, they have the same policy objectives as pension funds which have been exempted," he added.

Tapera also recommended the exemption of school fees payment.

The tax was initially was announced on October 1 as a review of treasury's Intermediated Money Transfer Tax from five cents per transaction to two cents per dollar.

"The two cents per dollar tax will apply on transactions of $10 and above only. Transactions below $10 will be exempt from this tax. There is a cap of $10 000 on the amount of tax to be paid. This implies that transfers above $500 000 will attract a flat tax of $10 000," the Treasusry boss said in a statement last week.

Additional exemptions for the tax also include "intra-company transfer of funds including transfer from intermediary accounts, transfer of funds on purchase and redemption of money market instruments, transfer of funds to intermediary accounts, for example, conveyancers, and the transfer of funds by government".

The tax is set to bring up the country's revenues which have been subdued over the years on account of the increasing informalisation of the economy.

According to the central bank, in 2017, the country's financial system processed 5,9 million transactions through the RTGS platform, transferring funds amounting to $61,7 billion.

Treasury collected $295 000 at most, under the five cents per transaction tax.

Assuming that 25 percent of these transactions were for amounts of between $10 and $10 000, treasury would have collected millions in tax from RTGS alone, which accounted for less than one percent of all transactions by volumes.

The review extended the collection of the money transfer tax to "all electronic financial transactions", which includes mobile transactions that accounted for 75 percent of all transactions in 2017, by volumes.

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