By Vince Musewe
IT is an incontrovertible truth that tax systems can contribute to social justice by raising revenues for public spending on services and fostering equitable economic development, maintenance of key institutions which service public needs, redistributing wealth to reduce income and gender inequalities, ensuring accountable governance, influencing damaging practices of individuals and companies by “repricing” goods, incentivising economic activity in support of national development plans and industrial policies to help create employment and provide goods and services.
Tax justice is a broad concept developed by civil society to enable stakeholders to articulate what they think is acceptable in a tax system in any given context. The Tax Justice Network Africa’s report suggests that important elements include putting tax in human rights and social welfare contexts, making tax a part of a rights-based approach to governance and ensuring that the voices of less powerful people are heard alongside the voices of powerful, special interests.
Tax justice has two aspects:
Horizontal justice — realised when taxpayers who face equal conditions, for example in terms of income or family size, pay the same amount of tax.
Vertical justice — realised when people who are facing different economic conditions are treated differently in the sense that their tax responsibilities are differentiated, ensuring those who are in a better economic situation pay proportionately more.
Tax justice contributes to social justice in two ways: by financing public expenditures that play a role in reducing inequality, meeting needs and realising rights; and by ensuring that taxes are raised in a way that distributes the tax burden equitably, and helps to redistribute income and wealth.
The concept of tax justice is particularly relevant to a country such as Zimbabwe given that a significant majority has long felt deprived of economic opportunity and continue to operate in a survivalist informal sector while the provision of public services such as health, education, potable water has deteriorated over the years.
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A good example is the latest World Bank report on Zimbabwe which estimates that in 2020, 49% of the Zimbabwe population experienced extreme poverty while the top 10% of the richest, that is the wealthy elite, consumed 20 times what the poor consumed.
The role of economic policy in addressing inequality is at the forefront on current policy debates. It has been argued that inequality can impede the pace and quality of growth and, certainly, it undermines good governance by enabling political capture by the elite and entrenching their interests above those of the wider population.
Inequality also makes it harder to fund universal public services, and there is evidence that it harms health and educational outcomes. Inequality is, therefore, a barrier to social justice, and tax and fiscal policies are critical in addressing it.
It is self-evident that Zimbabwe requires radically different economic and social policies with social justice at the forefront, based on equitable and progressive policies to raise sufficient revenues for public expenditures. Such policies must prioritise marginalised groups and regions, alongside investment and incentives to create decent work opportunities and a more productive industrialised economy which is not hugely dependent on primary product extraction.
Tax systems can, therefore, be assessed from a tax justice perspective and this includes the need to ensure tax systems raise sufficient revenues to finance public goods while avoiding negative effects such as discouraging domestic or external investments; avoiding unnecessary tax incentives that are a drain on public resources; designing tax systems to ensure the equitable distribution of tax burdens; the impact of tax systems on gender equality; and the need to address tax evasion and avoidance.
It is, therefore, mandatory for citizens together with civil society groups to play an important role in ensuring that tax and fiscal policies are relevant to national contexts, promote social justice and are coherent with national development and human rights commitments.
The key principles upon which we can assess tax justice include:
- Tax and fiscal systems should support sustainable and equitable national development. They should be aligned to national development plans and industrial policies and ensure the efficient use of resources, including, for example, by responding to the different needs of men and women, financing public investments that bring sustainable economic benefits, and supporting social protection and public services that meet the needs for people living in poverty.
In the case of Zimbabwe, we have a long way to go. Although since 2019 we have seen an increase in revenues collected by Treasury and better fiscal management, there remains a significant social infrastructural deficit.
Investment in infrastructure has certainly improved but the issues of addressing gender inequalities and ensuring adequate and inclusive social protection remain a challenge. The lack of investment in social infrastructure and the lack of social safety nets for the marginalised, for example, was exposed by the COVID-19 pandemic which saw an increase in extreme poverty and failure to access affordable healthcare. Our key social indicators are a source of worry despite the budget surplus announced by government.
The national development plan NDS1 looks at human capital development as a key deliverable but much will depend on effective devolution of economic power to create inclusive growth and reduce the high income disparities.
The efficient use of resources requires urgent attention given the latest Auditor-General report which exposes government abuse of allocated resources at ministerial level while corruption has not been seriously tackled.
These issues continue to increase the trust deficit among government citizens and civic groups where rampant abuse of public assets and resources has not been adequately addressed.
- Tax policies should be effective and fair. The burden of taxation should be distributed equitable and proportional to ability to pay. Tax collection should be efficient to maximise the available resources for sustainable development.
Fairness should be strengthened by improving differentiation in tax rates, and redesigning tax incentives (for example, to support productive economic activity and small enterprises) and ensuring “direct” taxes on goods and services distinguish between luxury and essential goods. Zimbabwe’s tax regime is regressive by nature with the poor and low income earners being burdened by both direct and indirect taxes.
- Tax systems should be transparent and accountable. Governments should respond to the needs of citizens, implement policies that are coherent with sustainable development, combat corruption and tax dodging, and put in place mechanisms to expand community and civil society participation in tax and budget processes at all levels.
Although budget consultations are a regular event it appears that most citizens are more concerned about expenditure allocations than tax issues simply because the former is less complicated.
The effectiveness of tax and fiscal policies should be measured not only in terms of the revenue generated, but also by the extent to which this revenue is being used to support coherent and effective plans for achieving development goals and economic and social benefits.
