Zimbabwe Introduces A 1% Tax On All Foreign Payments4 months ago
The Zimbabwean government has announced that starting June 1, 2023, a one percent (1%) tax will be applied to all foreign payments. The move announced on May 29, 2023, is one of several measures adopted by the government to address months of economic instability, rapid depreciation of the Zimbabwean dollar, and significant price hikes. Finance and Economic Development Minister, Professor Mthuli Ncube said the Treasury will:
• Introduce a 1% tax on all foreign payments.
The tax on all foreign payments in Zimbabwe can help the economy in multiple ways. Firstly, the revenue generated can fund public services and infrastructure development, addressing social and economic challenges. Secondly, it can reduce the outflow of foreign currency that depletes foreign exchange reserves, thereby managing its availability and flow, and reducing dependence on external sources.
Additionally, the Zimbabwean government is introducing a system to trace the origin of gold, both commercial and small-scale, in line with international standards. This follows the release of the Gold Mafia documentary by Al Jazeera, which exposed gold smuggling and money laundering involving senior government officials, Fidelity Printers, ZIMRA, and RBZ. The country reportedly loses billions of dollars annually due to illicit gold trading through porous borders.
Ncube also stated that Treasury will now fund the Zimbabwean Dollar component of the 25% foreign currency surrendered by exporters to eliminate the creation of additional money supply. He said banks will no longer withhold any foreign currency surrendered by exporters, and all liabilities to the banks will be settled through Treasury.
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The minister also stated that the Treasury will maintain the USD Cash withdrawal tax at 2%. This tax was introduced in May 2022, where the Foreign Currency Cash Withdrawal Levy for amounts above US$1,000 was reviewed from 5 cents per transaction to 2%.
Ncube also said excise duty on fuel will now be paid for in foreign currency. This is a departure from a directive issued in 2019, as published in a Government Gazette Extraordinary dated 20th May 2019. At that time, Ncube reduced the rate of excise duty on leaded petrol and unleaded petrol to a uniform rate of $1.15 per litre and the rate of excise duty on diesel and power kerosene to a uniform rate of $0.90 per litre. The new rates were expressed in the local currency, not the US dollar.