KINGSTONE ZIMUNYA
HARARE—When Finance Minister Mthuli Ncube announced proposed tax measures for the 2024 fiscal year, part of the intended purpose of introducing such a tax policy was to "support retailers and prevent them from facing unfair competition from informal traders".
However, when the tax measures came into effect during the first trading week of the year, there were unintended consequences.
The same formal businesses that were supposed to be ‘protected’ by this tax regime cried foul.
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| Fine-tuning or backtracking?—Finance Minister Mthuli Ncube announces adjustments to the tax measures gazetted on January 1 |
Business leaders, led by the Confederation of Zimbabwe Industries (CZI) rushed to calm the storm and announced a supposed moratorium on the tax measures.
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| The supposed moratorium granted to businesses, as announced by CZI. |
However, in a statement released on Tuesday, Minister Mthuli Ncube flatly refuted ever having granted a moratorium to the CZI, saying ”The Ministry of Finance does not relay information through third parties.”
Nonetheless, moratorium or not, the confusion has bought enough time for government to right its wrongs, kind of.
Government, however, did admit that they were paying attention to the business leaders’ cries.
In the statement, Mr Mthuli Ncube disclosed that Treasury had consulted a Technical Committee to receive input from Representative Members under the umbrella body of the Confederation of Zimbabwe Industries.
“The Committee undertook an impact analysis on the implementation of some of the measures introduced through the 2024 budget, in particular with regards to tax compliance on route to the market, mitigation of consequences of the sugar on health through a special surtax, and a few tariff lines that were omitted on exemption from Value Added Tax, in o,” the statement continues.
The 'fine-tuned' measures are outlined in the Press Statement as follows:
Route to Market
1. Retailers can purchase from Manufacturers as long as they have obtained a valid Tax Clearance Certificate, and are VAT registered.
2. Manufacturers are permitted to sell to institutions such as hotels, schools, and other corporates, provided such clients are registered for VAT and possess a valid Tax Clearance Certificate.
3. In order to protect the quality of goods, and safety of consumers, perishable products that include bread and milk products will be distributed by manufacturers directly to retailers.
4. Concern was raised with regards to the survival of the rural traders, since they are not registered for tax purposes. These traders will however continue to purchase their goods from the wholesalers hence there will not be any disruption of trade. Manufacturers will also supply direct to small traders in the rural areas.
5. Where the manufacturer distributes directly to customers who are not registered for VAT, are not in possession of a valid VAT certificate and also not registered for Income Tax purposes, a 5% Withholding Tax shall apply.
6. Companies that serve online customers are allowed to continue to transact using this method provided they are fiscalised so as to guarantee compliance to the Value Added Tax.
7. In the interest of promoting an environment conducive for healthy and efficient tax collection, local authorities are urged to issue vendors with licenses that are linked to the place of business.
Special Surtax on Sugar Content
1. Cognisant of the need to build volumes, the Special Surtax on Sugar Content on specified on specified beverages has been adjusted to $0.001 per gram and will be effective on the date of gazetting.
2. For the avoidance of doubt, the Special Surtax will apply on added sugar only.
3. In addition, given the possibility of substituting sugar with sweeteners, these will be deemed as sugar for tax purposes.
4. As revealed through the consultation process, the increase in the price of the beverage products should be modest, hence the tax is not expected to disrupt the market.
Value Added Tax
1. In order to ensure consistency in the Cooking Oil value chain, cotton seed and soya beans and its derivative products will be included in the exemption schedule.
2. Basic food items including bread, milk, cooking oil, mealie meal, salt, sugar, flour, are exempt from Value Added Tax purposes, hence there should be no price increases.
3. Other basic commodities that include meat, rice, bath and laundry soap, toothpaste and petroleum jelly, have been moved to standard rating, hence, price increases should be minimal.
Policy Making in Zimbabwe: Calculated Trial and Error, And the Elephant in the Room
Remember when it was announced that the government ‘reduced’ passport fees from $200 (the initial ‘proposed’ amount) to $150 (what they were planning all along)?
This is what has defined policy-making in the Second Republic. Yet again, government has employed this brazen tactic.
It would seem that government is taking advantage of the low expectations they have created of themselves to test policies in real time.
Citizens always expect the worst. So that’s what is proposed. When there is an outcry (as expected), government swoops in and ‘saves the day’ by ‘fine-tuning’ that worst into some worse version that ensures the nation keeps limping on. Rinse and repeat.
A government that is focused on a distant future ends up overlooking the immediate short-term impact of policy decisions.
Why are consultations made after the proposals are made? Is the office of the Treasury in lack of economists and statisticians who can forecast? Unlikely.
It’s about objectives. But as we have seen since 2018, in chasing one objective, government ends up forsaking immediate, pressing objectives.
In an effort to raise revenue to cover a widening budget deficit, Treasury had neglected seemingly common-sense issues like the rural population (which makes up 61% of the population) and even the short shelf life of perishables.
This is a chaotic economy, where there are just too many moving pieces. All these pieces should be considered in policy-making. Alas!
Also, why does government consider the plight of the average Zimbabwean after the fact? Shouldn’t that be the first consideration?
Policy inconsistencies have created a government which is capitalistic in policy-making and socialistic in crisis management, or whatever distracts the average Zimbabwean from the stark reality—we’re in the midst of an economic crisis.
The words ‘hence there should be no price increases’ were emboldened in the statement, as if the Zimbabwean market forces (of all the market forces) will oblige to yet another written instruction from the powers that be.
You can’t force an economy into behaving well, you nurture it, through sound economic, fiscal and monetary policies.
Lastly, we must address the elephant in the room—corruption.
Zimbabwe is a vastly endowed nation that can achieve resource self-sufficiency if only policy makers focused on delivering their responsibilities, instead of asking for US$50,000 cars and to bring their wives on work assignments.
Sadly, we have chosen to become a nation that enriches foreigners and the few who grant said foreigners access to our wealth.
The proceeds of this ‘dirty money’ trickle down the black-market economy, making almost everyone complicit in the plundering of our wealth.
That moneychanger you see on the streets, have you ever asked yourself how he always has the freshest bank notes, yet your bank couldn’t issue withdrawals?
But you still change your money with him, don’t you? Don’t blame yourself, what other choice do you have? It’s corrupt, its illegal, but it’s been normalised. Our Zimbabwe.
Those who can’t handle the pain will have to fork out the ‘reduced $150’ for a passport and search for ‘greener pastures’ elsewhere.
Being a care worker in our colonisers’ countries is now more lucrative than staying in a country with sixty seven known minerals.
Let’s be honest, even if we copy the economic policy of the most functional economy in the world right now, Zimbabweans’ decrepit moral fabric will waste away any expected gains from such a policy.
Corruption has become so ingrained in all of us—from the young schoolboy, to the uniformed officials, right up to the big wigs making policy decisions.
Until government decides to make a conceited, deliberate effort to curtail corruption, no amount of policy making, fine-tuning, and backtracking will deliver us from this economic quagmire.
This tax regime saga is yet another episode in the continued suffering of Zimbabweans, as its real time effects are already being felt all over the country.
And what are the chances that the prices will follow the Finance Minister’s emboldened instruction?
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