When Mthuli Ncube raised the IMT tax from a fixed couple of cents to 2%. That tax has had far-reaching consequences and has hardened people’s negative attitudes toward putting their money in the bank. For some reason, in a speech in which he acknowledged that one of the reasons the economy is not doing well is due to low confidence in the financial sector, the president thought it was a good idea to increase this tax to 4% for foreign currency transactions while the tax remains at 2% for local transitions. In his mind this is going to stop the black market- in reality, it will simply boost it.

Tax incentives for using local currenty

Government is, with immediate effect, putting in place a differential taxation system for the Intermediate money Transfer Tax (IMTT) as follows:
1. 2% would continue to apply to local currency transfers, and
ii. All domestic foreign currency transfers to attract the Intermediate Money ransfer Tax (IMTT) of 4%.
Foreign payment settled through the willing-buyer-willing seller and foreign currency exchange auction system shall remain exempt from the IMTT.
The president’s speech on the issue

This is a boost for the public favoured National Mattress Bank (NMB not to be confused with the very real bank known as NMB). If you put money in your mattress or pillow you will not have to suffer these outrageous taxes that the government keeps introducing. Rather than promote usage of the local currency that new levy will be factored in prices and just about every transaction. The result will be two things:

Even more, people will favour cash as opposed to using banks
In the short term, the government will collect a bit more IMMT
Prices will go up in USD as companies rush to pass this cost to the customer
Ultimately inflation will go up

Each time our arrogant government opens its mouth it proves proponents of the NMB bank right. Money in your mattress may be vulnerable as you can get robbed but it is far far away from the government’s claws. As things stand the government is more likely to cook up a law to disposses you of your hard-earned money than it is for robbers to strike so the aversion against banks is quite sensible.