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Reality to sink in after Santa departs



WINSTON Churchill once said for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.


This famous quote by the former United Kingdom prime minister can serve as a reminder of how Zimbabwe’s government appears more adamant to squeeze the last dollar out of the long-suffering populace.

While the meaning of the quote has largely related to then protectionist measures that were aimed at saving the UK’s economy, in Zimbabwe the message has been widely viewed through the lenses of polysemy.

 For the authorities, taxing has become the only option to fund the growing bucket list which includes under-stocked hospitals, rundown public schools and impassable roads.

With a two-thirds majority in Parliament, the ruling Zanu PF now effectively has carte blanche powers to dominate the politics of the day. Opposition nays will be drowned by Zanu PF’s dominance.

A bruised opposition battling recalls triggered by self-imposed interim secretary-general Sengezo Tshabangu and internal strife is increasingly becoming ineffective in calling Zanu PF to order.

 By now most companies, including mining firms, have gone on annual shutdown and the merry-making is quite palpable.

Optimists say there is light at the end of the tunnel following the announcement of the 2024 National Budget. Sceptics however doubt that.

That light could be a train approaching. Experts say Treasury’s proposals to widen the country’s revenue base through a raft of taxes will stoke inflation and push millions into poverty.

 Zimbabwe is battling high inflation, a weakening domestic currency and astronomical levels of unemployment at a time the government has weak safety nets to cushion the vulnerable.

 Experts say structural weakness, policy uncertainty, corruption and international  isolation have inhibited the Zimbabwean economy from performing adequately since the early 2000s, resulting in episodes of economic recession.

 Before announcing the national budget, business organisations such as the Zimbabwe National Chamber of Commerce, Confederation of Zimbabwe Industries and the Chamber of Mines of Zimbabwe made several proposals with one common thread: tax reforms.

 But no one seems to care. In November, Finance minister Mthuli Ncube announced a ZW$58 trillion National budget to be funded by belt-tightening measures ranging from new taxes on fizzy drinks, raising toll fees, hiking surcharge on flashy cars to levying Zimbabweans with the financial wherewithal.

And guess what?

 Most of these will come into effect during the first quarter of the year 2024.

 Operating with limited budgetary support, Treasury has since the early 2000s been defaulting on arrears payments to multilateral lenders, and is now heavily relying on mainly domestic resources to finance its capital projects as well as social spending.

 After defaulting on arrears owed to international financial institutions, 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 expenditures on infrastructure.

 In a desperate move to mend the country’s dilapidated road network, Ncube proposed an increase in tollgate fees from the current US$2 for light vehicles to US$5 on so-called “premium roads” like Harare-Beitbridge.

On “other roads”, the fee will double from US$2 to US$4 While Ncube raised the tax-free threshold for salaries in local currency, civil servants also received a bittersweet message from the budget.

 The US$300 Covid-19 allowance introduced to cushion the public service during the pandemic is now part of their pensionable salary, starting in January, meaning fewer greenbacks in their pockets. 

 Ncube also introduced a new tax for multinational corporations which he called the domestic minimum top-up tax (DMTT). The Finance minister says global rules now demand that large multinational enterprises pay a minimum corporate income tax rate of 15%.

He says generous tax incentives are allowing these companies to pay less than this. He is proposing a new tax, the DMTT, which allows the country hosting the multinational to collect “top-up tax” rather than the tax going to the headquarters of the company.

The corporate tax has been raised back up to its original level of 25%, after it was cut to 24% in 2020 to help businesses through Covid.

 “Granting of generous tax incentives result in an effective tax rate of less than 15% for some multinationals,” Ncube said.

 “Under the Global Tax Rules, where a tax incentive results in an effective rate of less than 15%, the tax jurisdiction where the multinational is headquartered collects the difference between the effective tax under the tax incentive and the minimum effective rate of 15% (the top-up tax).”

The Finance minister also proposed to raise the surcharge on high-value vehicles.

Turning to the mining sector, Treasury proposed to introduce a 1% levy on gross proceeds of lithium, black granite and other cut or uncut dimensional stones and quarry stones to ensure that they plough back into communities they operate from.

This is what Ncube had to say on tax on fizzy drinks: “In response to the growing concerns on the adverse effects of consumption of sugar, in particular, contained in beverages, tax on beverages has been implemented in a number of countries, including in the Sadc region.”

“The consumption of high sugar content beverages is linked to increased risk of non-communicable diseases. “It is, thus, necessary to discourage consumption of high sugar content beverages, hence, I propose to introduce a levy of US$0.02 per gramme of sugar contained in beverages, excluding water, with effect from 1 January 2024.”

Winter is coming . . . Brace up for the New Year!

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