Zimbabwe expects to raise $700 million a year from a new tax on money transfers that triggered panic buying of goods from fuel to sugar and sent its quasi-currency plunging.
The southern African nation, reeling from shortages of foreign exchange, is targeting total revenue of $5.7 billion in the current fiscal year and $6.4 billion in 2019, Finance Ministry Permanent Secretary George Guvamatanga said in a presentation in Harare, the capital, on Monday. The government is scheduled to present its 2019 budget next month.
Finance Minister Mthuli Ncube introduced a 2 percent tax on money transfers this month to broaden the country’s tax base, part of a series measures he’s implementing to stabilize the economy. The levy of 2 cents per dollar transacted replaced a previous tax of 5 cents per transaction.
“Although this is a bitter pill to swallow, we have to accept the principle that it was necessary for everyone including our large informal sector to contribute to the fiscus,” Guvamatanga said.
The country hasn’t had its own currency since it scrapped the Zimbabwean dollar in 2009 to end hyperinflation. It accepts the likes of the U.S. dollar, euro and rand as legal tender, as well as a quasi-currency called bond notes.
The value of bond notes, introduced two years ago and which were meant to be worth the same as greenbacks, has plummeted since the new tax was announced, with locals rushing to buy goods while they still hold value.
The majority of transactions in the country are electronic, which are worth even less than payments via bond notes. Shops charge different prices depending on whether customers use real dollars, bond notes or pay electronically.
The new tax will increase costs for companies, which they will pass on to consumers, according to John Robertson, an independent economist in Harare. Many companies may be forced to reduce their operations or close altogether as people’s spending power is hit, he said.