THE ZW$58.2 trillion 2024 National Budget presented by Finance minister Mthuli Ncube, underlined by a heavy tax regime, shows that the government is increasingly becoming anti-people, and is likely to worsen Zimbabwe’s socio-economic crisis.
Zimbabweans are now paying the price for the country’s pariah status — international isolation — and low credit rating as they are increasingly overburdened with extortionate taxes since the government is unable to get international funding and lines of credit, especially for capital expenditure on infrastructure.
The country’s isolation has been largely caused by the government’s fallout with Western countries over policy differences, human rights abuses and a series of stolen elections. This led to targeted sanctions which, put together with the government’s failure to pay its debts and arrears, dried up external funding needed for boosting liquidity and funding development projects.
In the 2024 budget presented by Finance minister Mthuli Ncube, the government proposed tax hikes and new tax regimes which include a “wealth tax” on house ownership, reminiscent of the colonial era “hut tax”.
Tax hikes were also effected in toll fees on premium roads, that is, Harare-Beitbridge and Plumtree-Mutare and other roads by between 250% and 300%, raising an outcry.
Passport fees have also been hiked, with an ordinary passport now costing US$200, up from US$120, while an emergency passport now costs US$300, up from US$220.
Economist Professor Gift Mugano said the proposed tax hikes will bring more pain to the already impoverished people, hence deepening the socio-economic crisis.
“The decision to exclude traders without VAT certificate is very harsh and insensitive considering that more than six million people thrive on trading in the face of 85% formal unemployment and drought of economic opportunities. These people, in their individual capacities, do not have annual sales turnover of US$25 000 which is required to secure the VAT certificate,” Mugano said.
“This measure is expected to impact on the manufacturing sector negatively because the informal sector helps them to push volumes especially in manufacturing industries such as food and beverages (bread, ice cream, drinks, etc). In the bread sector, for example, the volumes are pushed by vendors and tuckshops (not supermarkets) which are now supposed to be excluded from the bread value chain. This will result in a drastic fall in sales, which has a net negative effect on production and jobs.”
Mugano said the Zanu PF government and the main opposition Citizens’ Coalition for Change (CCC) should unite in Parliament to reject the proposed budget as it is likely to deepen the country’s socio-economic crisis.
“It is my prayer that Zanu PF and the Citizens’ Coalition for Change (CCC) MPs unite on this one and reject this useless budget. If Zanu PF use their majority vote to support this useless budget and overpower CCC by virtue of their numbers, they are voting for more poverty for their rural constituencies where they got most of their votes.”
Economist Dr Prosper Chitambara said the current budget has done little to promote social welfare, with the ministry of Public Service Labour and Social Welfare receiving ZW$2.4 trillion, equivalent to about 0.4% of gross domestic product, 1.1 percentage points lower than the 1.5% global target.
“And you also know the country is in the midst of a cholera outbreak and addressing this obviously requires significant public investments in water, sanitation and hygiene, the Wash sector. And so government is proposing to spend ZW$608.3 billion towards the Wash sector, that represents just about 0.4% of GDP. And the benchmark there is at least 1.5% of GDP,” Chitambara told The NewsHawks.
“You know social dialogue has an important role to play in terms of the crafting of policies that promote social justice, which is critical in terms of preserving jobs, incomes, and also ensuring the sustainability and viability of companies and businesses, especially during periods of crisis.
“In terms of the revenue proposals, the tax-free threshold has been reviewed upward, which is positive, but I think there is need for continuous reviews, especially in line with inflationary trends and developments.
“This is critical in order to cushion the working class and also as a way of boosting aggregate demand in the economy. The corporate tax rate has also been reviewed upwards to the pre-Covid level of 25%. Obviously, this will result in an increase in the cost of production and doing business in general.”
Several other allocations from Ncube’s budget fell short of international benchmarks. Chitambara said while the Education ministry got almost 17.7% of the total vote allocations, it still fell below the Dakar Declaration target of 20%.
The health sector has received about 10.8% of the allocations, a decline from 11.2% allocated this year. However, this also falls below the Abuja Declaration target of 15%.
The agriculture sector, which has been allocated ZW$4.3 trillion, which is about 7.4% of the total budget, also falls below the Maputo Declaration target of 10%.
Chitambara said the government’s newly proposed tax hikes are likely to increase the cost of doing business and accessing public services.
“While government has come up with a raft of other proposals, for example, the strategic reserve levy on fuel has been reviewed upwards. Toll fees have also been reviewed upwards. Vehicle registration fees have been reviewed upwards. Passport fees have been reviewed upwards. And the introduction of a sugar levy and also introduction of a wealth tax,” he said.
“So all these proposals will result in an increase in the cost of accessing public services, the cost of transport and logistics, and the price of fuel will also increase and the overall cost of doing business in the country is going to increase.
“So the net effect will be to reduce disposable incomes while eroding the country’s overall competitiveness.”
Political economist Vivid Gwede believes funds allocated to the Zimbabwe Electoral Commission (Zec) is likely to be blighted by the controversial recall of CCC parliamentarians should they continue unabated.
The country, which held disputed general elections on 23 August, is going back to the polls on 9 December, after recalls by the party’s self-proclaimed CCC secretary-general Sengezo Tshabangu.
Zec, which spent US$188 million on elections, was allocated ZW$116 600 000 000 (US$20 137 979) by the national budget, which Gwede says is likely to be exhausted through the by-elections.
“These by-elections are costly if you consider that the money could be used for other purposes. For instance, our health facilities need to be more equipped. In the budget statement the minister of Finance revealed that nearly half of funding requests from ministries could not be met due to limited fiscal space. So every dollar counts. These by-elections are a further drain on that limited fiscal space,” Gwede said.