ECONOMIC analysts have criticised Finance minister Mthuli Ncube’s tax regime, saying it is retrogressive, after beverage prices were sharply hiked in response to the sugar tax.
NHLANHLA SIBANDA
Ncube, in his 2024 National Budget, implemented a tax on beverages that contain sugar, charged at US$0.002 per gramme, effective 1 January.
This has seen the prices of beverages shooting up.
For instance, a two-litre bottle of Mazoe Orange Crush produced by Schweppes Zimbabwe is now costing US$5.10, a US$2.10 hike from US$3, while a 500ml bottle of Maheu is now costing US$0.75, up from between US$0.50 and US$0.60, depending on the retail outlet.
In response to the resultant price hikes, the government gazetted Statutory Instrument (SI) 16 of 2024 last week which reduced the surtax from US$0.002 to US$0.001 per gramme of sugar in beverages. But prices remain high.
Economist Vince Musewe told The NewsHawks this week the tax regime has been retrogressive and harsh on the poor.
“Zimbabwe tax regime remains regressive. For example, most of our tax revenue comes from VAT which is insensitive to income levels. We need a progressive tax structure which does not penalise the poor while protecting the rich,” Musewe said.
“We must also ensure that our tax regime does not incentivise tax evasion and incentivises compliance. It must also support local businesses to invest locally while cushioning the poor. Such principles will see increases in revenue and economic growth.”
“I am not sure whether a sugar tax reduces consumption of sugar as claimed. However, it merely leads to consumers seeking alternative cheaper products while it has a negative impact on business revenues.”
Economic analyst Dr Prosper Chitambara told The NewsHawks that higher taxes have been taking a toll on retailers and consumers.
“Higher taxes are normally not good for the economy. They affect economic confidence, they increase prices because a tax ultimately is a cost on production which affects pricing because if there is an increase in the cost of production, what the producer does is to pass on that to the final consumer. Hence we have seen a raft of price increases on account of the implementation of the tax reforms,” Chitambara said.
“Well, I think it is a bit too early to judge the tax measures in terms of whether they have been successful or not, but of course what we have seen as a direct impact of that has been the increase in the cost of goods and services which ultimately affects the prices of goods and services across the economy.”
“Even the cost of importing basic commodities has been increased following the re-introduction of duties on imports of basic commodities. How much government has raised so far, it’s not yet clear and what that has been used for because that also helps in terms of evaluating whether the tax measures have been a success or not.”
