ZIMBABWE’S 17 stockbroking firms are battling to remain profitable due to the current restrictive stamp duty payment regime, which they say is eating into their commissio
n and earnings.
Broking firms have since lobbied the Ministry of Finance and Economic Development through the Zimbabwe Stock Exchange, to review the current stamp duty payment regulations, which is now threatening their business.
The concerns also come on the back of sagging business for broking firms.
At the centre of the broker’s plight is the fact that the collector requires them to pay a 2% stamp duty for every transaction within 24 hours after the deal.
Brokers say they are now forced to borrow billions of dollars to finance stamp duty charges.
The brokers would then have to recover their charges from the client only after seven days, by which time they would have lost other lucrative transactions.
The impasse on the stamp duty is also threatening to slow down volumes on the stock market as brokers shun smaller deals because of the prohibitive transaction cost.
This seriously affects the smaller investors who lack the capacity to move larger volumes that are now more attractive to the broking firms.
“Our commission is being eroded because we are being asked to pay stamp duty upfront for a transaction that would only be settled after seven days or worse still three months later,” said a manager with a broking firm.
“We are financing costs of duty and at the current interest rates broking firms are losing revenue. And to make matters worse the guy (tax collector) just sits there doing nothing but stamping and for that he collects 2% – more than we foot soldiers are making.”
Broking companies charge 1% for every transaction – shares bought or sold through their company.
The brokers have since appealed to the Ministry of Finance and Economic Development to be allowed to pay their duty after settlement of the deals.
Letters of appeal have already been written to the ministry to have the duty paid in deferred basis.
The storm over the stamp duty charged on brokers began six months ago when the government proposed a 5% charge on all transactions.
The broking firms through the stock exchange then pushed for the duty to be slashed to 2%.
ZSE chief executive officer Emmanuel Munyukwi this week confirmed that the brokers had made representations to the ministry.
“We have put our case to the ministry and they are working on it. They might have to amend the Stamp Duty Act to be more flexible in terms of payment,” Munyukwi said.
He confirmed that he had been in touch with the Taxes department to try and find a solution to the problem.
“I know the impact of the stamp duty payment structure on the brokers. In fact I have just been speaking with them (ministry officials) and they are now looking at ways to solve the problem,” Munyukwi said.