A Zimbabwean analyst, David Mhlanga, has described the latest fiscal measures by the Zimbabwean government which reviewed money transfer tax in the country as potentially dangerous for the financial inclusion agenda of the government.
Mhlanga, in his article published in Zimbabwe Situation on Friday specifically pointed out that the latest review of intermediated money transfer tax from five cents per transaction to two cents per dollar effective October 1 would impact negatively on economic operators, especially the Micro, Medium and Small Enterprises (MSMEs) in the country.
The country’s Finance and Economic Development minister, Mthuli Ncube, had announced on Monday the review of the intermediated money transfer tax from five cents per transaction to two cents per dollar transacted.
In his article titled ‘Money Transfers Tax a Threat to Financial Inclusion, the columnist stated that the new tax regime remained a threat and totally against financial inclusion.
He listed sundry barriers to financial inclusion within the MSME sector in the country as low incomes levels within the MSME sector; irregular incomes to support consistent loan repayment requirements; information asymmetries regarding funding options at the disposal of the MSMEs and cooperatives; lack of product and service awareness; and high and uncompetitive interest rates and bank charges offered by financial institutions.
According to him, barriers to financial inclusion within the insurance and pensions industry include, low disposable incomes; lack of innovation by services providers; low confidence in suppliers of insurance and pension services; low levels of financial literacy; an inadequate legal and regulatory framework; high product and service distribution costs; and lack of accessibility of products and services.
Mhlanga clarified: “This tax is increasing the cost of transactions which is one of the chief barriers to financial inclusion. The tax is increasing transaction costs which will encourage many Zimbabweans to shun the formal financial system. When this happens, poverty and underdevelopment will be a daily problem.
“Equally important, this tax will encourage informal financial market risks like money laundering and the RBZ will not be able to monitor the financial system. With financial inclusion, majority of transactions will be conducted through the formal financial system which enables more effective monitoring by the central bank”, he added.
