Source: Tobacco exempted from 2% tax | Newsday (National)

Government has exempted the transactions done during the purchasing of the tobacco crop from paying the 2% tax in order to eliminate double taxation.

BY MISHMA CHAKANYUKA

Early this year, tobacco merchants suspended purchases of the crop demanding an exemption from this tax payment, saying that it was an extra cost because most of them use borrowed funds to finance the purchase and cannot easily absorb the additional tax cost.

Presenting the mid-year Budget review and supplementary Budget, Finance and Economic Development minister Mthuli Ncube said tax exemption will be on all tobacco transfer funds.

“Tax will be exempted on the following transfer of funds: Transfer of funds for the purchase of tobacco by tobacco buying companies to auction floors; transfer of funds by contracting companies and auction floors to farmers for deliveries of tobacco; transfer of funds for the purchase of cotton by financiers to merchants; (and) transfer of funds by merchants to farmers for deliveries of cotton,” Ncube said.

He said to cushion taxpayers against bracket creep and also stimulate aggregate demand for goods and services, the tax free threshold would be reviewed from the current $350 to $700, further widening the tax bands to a maximum of $30 000, above which income is taxed at the marginal tax rate of 40%.

Employees that earn in foreign currency will continue to settle their tax liability in foreign currency.

Ncube said a levy tax will be charged on transfer of money between mobile money transfer agents and recipients with effect from August 5, 2019.

“Consequently, the majority of illegal foreign currency transactions are being conducted through this platform, thereby evading payment of tax and sustaining parallel market activities. I, therefore, propose to levy tax on the transfer of money between mobile money transfer agents and recipients.”

“However, cash-in and cash-out transactions conducted through mobile money transfer platforms do not fall within the above criterion; hence the tax is not deductible,” he said.

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