Ncube in tax climbdown

FINANCE Minister Mthuli Ncube yesterday unveiled several exemptions to the tax on monetary transfers saying the 2 cents per dollar tax will only apply to transactions of $10 and above while intra-company transfers as well as transfers of salaries, tax payments, foreign currency-related payments and transfer of funds by the government will also be exempted.

BY FIDELITY MHLANGA

Ncube said the tax review, which comes in the wake of sweeping measures made on Monday, will be effective once the relevant regulations have been gazetted.

“At the occasion of the presentation of the 2018 Mid-Term Monetary Policy, I announced a review of the Intermediated Money Transfer Tax from the current 5 cents per transaction to 2 cents per every dollar transacted,” he said in a statement last night.

“The 2 cents per dollar tax will apply on transactions of $10 and above only. Transactions below $10 will be exempt from this tax. There is a cap of $10 000 on the amount of tax to be paid. This implies that transfers above $500 000 will attract a flat tax of $10 000.”

The Finance minister added that intra-company funds transfer, including transfer from intermediary accounts, transfers on purchase and sale of equities, purchase and redemption of money market instruments, salary and tax payments and transfers to intermediary accounts will also be exempted.

Ncube called on the nation to bear the “pain” of adjustment with endurance, patience and hope as government seeks to increase its revenue base to offset budget deficits. The tax concessions came in the wake of threats by labour and opposition parties to demonstrate against the tax burden.

Budget deficits are the major cause of Zimbabwe’s macroeconomic instability and financial sector vulnerabilities. By the end of July, it had already ballooned to $1,7 billion.

Addressing journalists earlier in the day Ncube said in this transition, government would not be treated as a sacred cow as Treasury had begun to close loose financial taps, rejecting “unjustified” requests for funding, starting with glaring leakages such as extravagant foreign travels, unscrupulous procurement practices which ripped government off, imprudent borrowings to finance unnecessary expenditures and lavish spending on luxury cars and benefits for senior civil servants.

Treasury will also follow up on every dollar disbursed to government departments through its public financial management system and monitoring and evaluation mechanisms to ensure the money is used efficiently, holding everyone to account in case of delivery failure.

As part of the austerity measures, the civil service will be right-sized through lay-offs; retirements and skills restructuring, backed by a new incentive system, which will be introduced to cater for those who are retained.

The 2019 and 2020 national budgets will institute wage bill containment measures, which will reduce the annual wage bill outlay by $200 million, about 0,7% of the country’s gross domestic product.

Ncube made these remarks to rally the nation behind the Transitional Stabilisation Programme (TSP), which he launched yesterday, four days after his ministry and the Reserve Bank of Zimbabwe (RBZ) announced a set of policy measures that technically de-dollarised the economy and raised taxes on mobile phone transfers.

The TSP aims to guide economic policies and reforms from October 2018 to December 2020 and to implement President Emmerson Mnangagwa’s Vision 2030, which seeks to move Zimbabwe to a middle-income country in 12 years.

The tax hike has eclipsed the importance of the stabilisation case and riled the public and workers unions as incomes have already taken a battering from rising inflation. Prices of some goods went up soon after the fiscal adjustment.

The respected economist, banker and expert on finance said economic stabilisation and growth could not be achieved without pain and insisted the tax hike was necessary to broaden the revenue base and buttress public finances.

“We are dealing with a bleeding economy, a bleeding government,” Ncube said.

“We are asking everyone to contribute to the fixing of the economy. We cannot do this without pain. My view is that there’s more pain at the beginning of the first year or two as we stabilise our macroeconomy. After that, we are all happy that we took the pain together as a nation at this stage, and we go forward. People don’t realise that they are already indirectly paying for the weak economy. What we are faced with is not direct, but indirect. All we are doing now is fixing it together by doing sacrifice.”

Ncube promised that in four months, Treasury would report to the nation how much would have been collected from tax, and how it would have been used.

Treasury secretary George Guvamatanga said the money would be committed to social services, mostly health care, focusing on underserviced areas.

The tax adjustments have been prompted by high economic informality, which has narrowed the revenue base and reduced tax compliance. In a 2016 study of the informal economies of the world, the International Monetary Fund estimated Zimbabwe economic informality at over 60%.

“It’s true that the economy is highly informalised, but financial inclusion has also increased. Thanks to the mobile telecommunication companies and banks, the use of electronic money has deepened. You find that measures that were effective before in broadening the tax base are no longer effective. So, we have to come up with new measures and this is one new measure,” Ncube said.

“The previous tax arrangement was regressive. At the higher end, people were paying very little and this is introducing some fairness.”

The TSP is underpinned by five pillars, namely governance, macroeconomic stability and financial re-engagement, inclusive growth, infrastructure utilities and social development.

Under the first pillar, laws such as the Access to Information and Protection of Privacy Act and Public Order and Security Act would either be “reformed” or “removed in future”.

The TSP is also expected to operationalise the Public Entities Corporate Governance Act to rein in failing public entities and restore order, consistency, transparency and accountability in their operations.

State-owned enterprises, parastatals and other government institutions will be restructured by way of privatisations; mergers and acquisitions and liquidations. Others will be subsumed under government departments.

TelOne, POSB and NetOne will be shed off “in the next six months”.

13 Comments

  1. LET ZANU PF BEAR THIS BURDEN OF TAXES. DONT TAKE US FOR GRANTED,YOU HAVE BEEN ABUSING US FOR QUITE A LONG TIME.ENOUGH IS ENOUGH.

  2. Comment…Policy inconsistency runs in zanu-pf’s DNA regardless of the officebearers. Not surprised.

  3. Your Name (required):Special Black

    ZANU PF listens to the people not paymasters. MDCA does not do that but throw spanners into the economy of Zimbabwe. Look around and see what is happening to your support base. ZANU PF is a peoples party. A big number of land lords in Zimbabwe are as a result of ZANU PF housing initiatives. You have now created a group of Economic Alarmists,who dectate rates and prices of goods, cause shortages muchiti ichi mukasatenga izvozvi mangwana hamuchiwani. Now ZANU PF is growing, next elections MDCA dhololo.

    1. Unopenga, pemberaika makahwina mhepo!!

  4. tendai chaminuka

    Mtuli shaa.I did not vote to bear pain but to enjoy the fruits of good leadership.Leadership which has solutions to problems

  5. no pain no gain …ok. Looking forward for the betterment of our economy.hope this TSP is going to be effectual.

  6. While the minister tells the people to bear with him and bite the bullet, the ministers are all awaiting their BRFAND NEW luxury limousines and SUV’s .
    I want to see if the minister and the president for that matter will have the balls to cut the spending on these luxury items as these seem to be on the priority for all government officials

  7. All the best Prof. Give us success you made at Barbican Bank??

  8. Your Name (required):Special Black

    In order to increase gvt revenue ministers of finance and mines should deploy fedelity printers officers at every gold mill to record and buy gold. All those using maturi should be stopped. You are crying of cash shortages put some measures of your choice and see what will happen in banks, within three days time people wont be able to finish cash in banks there are tons and tons of cash held illegal gold buyers and cash barons. I think there is a country which changed currency within 24 hrs.

  9. While i applaud the initiative (TSP) please remember these somersaults will not do good on policy consistence which is very critical for FDI – foreign direct investment. In less than 30 days in office yours has made 2 u-turns first on the bond note and now on monetary policy.

  10. Kuwiriranakwakanakakugarakunzwanana Garanewakohamandishe

    Gurukota rezvemari nhasi 8 Oct munhau ririkuti kune ZVIURU ZVINA zvemakambani asirikubhadhara mitero kuHurumende. Taurayi mazita awo. Uye ndinoda kuziva kuti vaNcube makapiwa here mazita eavo vose vakaburitsa mari munyika zvisiri pamutemo? Makana makapiwa zvidanho zvipi zvamatora kuti mari idzi dzidzoke? Munoziva here kuti ukatenga muchitoro cheIndian, Chinise, Nigerian nezvimwe zvevene veZimbabwe apana gwaro rinopiwa rinoratidza kuti watenga. Izvi zvichirevawo kuti akunazve mariwo irikuyenda kuHurumende yemitero. Itayi wongororo kuti zvitoro zvose zvedu zvose nekambani enyuwo ose arikubhadhara mitero here. Chimwe chikuru, mari ngadzifambe nenzira nzadzinofanirwa kufamba nadzo.
    Kwete kuti mari dzinowanikwa dzakazara mumigwagwa mabhanga asina. Hakuna kwatinoenda kana mari dzizere mumigwagwa vaNcube. Ngatirege kunyeperana zvedu. FIRST THINGS FIRST in a
    S.M.A.R.T way veduwe. KANA KUTI ZVICHANGORAMBA ZVIRI ZVIROTO CHETE KUSVIKA KAKUDO AVEKURIMA MINDA YAWOWO.

  11. Gurukota rezvemari nhasi 8 Oct munhau ririkuti kune ZVIURU ZVINA zvemakambani asirikubhadhara mitero kuHurumende. Taurayi mazita awo. Uye ndinoda kuziva kuti vaNcube makapiwa here mazita eavo vose vakaburitsa mari munyika zvisiri pamutemo? Makana makapiwa zvidanho zvipi zvamatora kuti mari idzi dzidzoke? Munoziva here kuti ukatenga muchitoro cheIndian, Chinise, Nigerian nezvimwe zvevene veZimbabwe apana gwaro rinopiwa rinoratidza kuti watenga. Izvi zvichirevawo kuti akunazve mariwo irikuyenda kuHurumende yemitero. Itayi wongororo kuti zvitoro zvose zvedu zvose nekambani enyuwo ose arikubhadhara mitero here. Chimwe chikuru, mari ngadzifambe nenzira nzadzinofanirwa kufamba nadzo.
    Kwete kuti mari dzinowanikwa dzakazara mumigwagwa mabhanga asina. Hakuna kwatinoenda kana mari dzizere mumigwagwa vaNcube. Ngatirege kunyeperana zvedu. FIRST THINGS FIRST in a
    S.M.A.R.T way veduwe. KANA KUTI ZVICHANGORAMBA ZVIRI ZVIROTO CHETE KUSVIKA KAKUDO AVEKURIMA MINDA YAWOWO.

  12. Empty minister

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