Britain mulls 2 percent tax

Felex Share Senior Reporter
Plans by Britain to introduce a two percent digital services tax shows there is nothing sinister with measures taken by Government recently to introduce an Intermediary Money Transfer Tax of 2 cents, an economic analyst has said.

In Zimbabwe, transactions between $10 and $500 000 are now attracting a 2 cents per dollar tax in line with new measures announced by Finance and Economic Development Minister Professor Mthuli Ncube as a way of dealing with fiscal imbalances.

Britain plans to introduce a two percent digital services tax in 2020, with Chancellor of the Exchequer Philip Hammond saying his government was aiming to raise 400 million pounds ($512 million) a year.

Mr Hammond made the announcement in his Autumn Budget in London this week. The two percent tax levy on sales made by large digital companies would apply to e-commerce channels, search engines and social networks like Alphabet Inc. and Facebook Inc.

“We will consult on the detail to make sure we get it right, and to ensure that the UK continues to be the best place to start and scale-up a tech business,” Hammond said.

“It will come into effect in April 2020.”

The European Commission is also proposing a digital tax on revenue that tech companies make from areas like ads and data, but has yet to agree on terms.

The UK plans to “go it alone” if the EU version of the tax continues to stall. Its tax will be aimed at big tech, affect companies that were profitable and with annual revenue of at least 500 million pounds.

University of Zimbabwe economics Professor and Government advisor, Professor Ashok Chakravati said Zimbabwe was on the right path with the economic measures it was taking.

Professor Ashok Chakravarti

“In many countries internet sales from big companies have increased and the governments are looking at how to put a small tax,” he said.

“Some of us economists have been recommending it for many years, although it has just been introduced. The reason behind it, in case of our country Zimbabwe, is that the informal sector is almost 50 to 60 percent of the economy. So the informal sector is using the road, hospitals, schools and they have to pay a little something as tax towards the fiscus. In economic terms its 100 percent correct.”

He said this was the norm in many countries.

“It has been done in so many other countries,” Prof Chakravati said.

“So there is nothing special about it. We are in a difficult economic situation a lot of people get upset but it’s quite normal. The Finance Minister has given a lot of exemptions now for the people in the business sector who are not happy. There is a long list of exemptions. It’s quite a reasonable measure.”

The tax introduced in Zimbabwe is designed to help the manufacturing sector get funds for retooling and modernisation as the economy gears to ramp up production.

The new tax does not apply to eight other types of transactions which are; inter-company transfer of funds, including transfers of intermediary accounts; transfer of funds on sale and purchase of equities; transfer of funds on purchase and redemption of money market instruments; transfer of funds for payment of salaries; and for payment of taxes.

It also does not apply to transfer of funds to intermediary accounts, transfer of funds in respect of foreign currency-related payments and transfer of funds by Government.