Bold measures to anchor ZiG stability, drive growth

Martin Kadzere

Business Reporter

THE Government has unveiled a cocktail of measures to further entrench the stability of the Zimbabwe Gold (ZiG) by promoting its broader use in the economy, as well as tax relief interventions designed to boost consumer spending and spur production.

Presenting the Mid-Term 2024 Fiscal Policy yesterday, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube also proposed measures to improve tax collection and curtail tax evasion.

Since its introduction in April this year, the ZiG has maintained relative stability and promoting the wider use of the local currency is expected to further solidify its position in domestic transactions while contributing to macro-economic stability.

The stability of ZiG, expected to bring benefits that include price and exchange rate stability, is anticipated to anchor sustained economic growth.

Minister Ncube has revised economic growth projections, estimating a 2 percent expansion this year, from the initial forecast of 3,5 percent, citing the impact of the El Nino-induced drought on agriculture and low global mineral prices.

The Minister said there will not be a supplementary budget, a situation expected to help keep inflation in check.

Some of the key measures proposed to promote the wider usage of the local currency include mandating payment of presumptive taxes in local currency and accepting local currency for duty on selected non-essential imports while Government agencies will be compelled to charge certain fees in domestic currency.

Minister Ncube said supportive tax and expenditure policy measures to increase demand for the local currency would help further stabilise the currency, adding that this would also require complementary monetary

policies that keep market liquidity in line with the desired growth trajectory.

“Going forward to year-end, fiscal policy measures will be deepened to protect the domestic currency, as well as to restore macro-economic stability,” he said.

“Containing expenditure pressures and major expenditure heads such as the wage bill and debt servicing will be critical in order to avoid monetising the budget deficit.

“This entails sustaining the cash budgeting policy, which aligns fiscal outlays to available resources,” he added.

The emerging sector, mainly consisting of micro and small enterprises, has been transacting largely in foreign currency cash, thus undermining aspirations to promote financial inclusion and transparency for tax purposes.

To promote the circulation of Zimbabwe Gold within banking channels, the Minister proposed paying of all presumptive taxes in local currency, regardless of the currency used for business transactions. He also suggested micro and small enterprises use point-of-sale machines and have bank accounts linked to the tax authority. The Government would announce additional measures to help these businesses operate legally.

Minister Ncube also offered significant cuts on presumptive taxes, in some cases, by as much as 80 percent to encourage compliance.

“The dynamic nature of the economy requires a review of the presumptive tax regime, cognisant of the significant contribution of such operators to the Gross Domestic Product (GDP),” said Minister Ncube.

Goods vehicles, taxi cabs or commuter omnibuses, shall neither be licensed by the Zimbabwe National Road Authority nor be eligible for vehicle insurance unless the operator submits clearance from the Commissioner General of ZIMRA confirming that the operator is duly registered and has no outstanding tax debt.

The Government will closely monitor fuel imports and sales starting November 1, 2024. All fuel sales will be recorded electronically using special devices. The new system, similar to the existing fiscalised tax system, would send sales real-time data directly to the tax authority to ensure all fuel taxes are paid correctly.

The fiscalisation programme is currently limited to Value Added Tax, through the VAT fiscalised recording of taxable transactions regulations, to safeguard the revenue base from potential under-declaration of sales.

To curb transit fraud, Minister Ncube proposed payment of duty and levies on fuel imported under Removal in Transit (RIT) at the port of entry. The duties and levies will be recovered on acquittal at the port of exit.

The measure, which takes effect from August 1, 2024, would not apply to fuel from the National Oil Infrastructure Company.

Further, ZIMRA would be charged to manage the duty refund process efficiently through dedicated bank accounts.

He also proposed that companies making more than half their income in foreign currency would need to pay their corporate taxes on a 50/50 percent basis in local and foreign currency while corporates earning more than half their income in domestic currency would pay taxes proportionately to the currency of trade.

The Minister suggested amending legislation to formalise the June 2023 policy requiring companies to settle 50 percent of the foreign currency portion of their second-quarter corporate income tax obligations in local currency.

Fees for precious stone dealing registration, approved prospector registration, special mining lease registration, liquor license fees, vehicle licensing among others, would also be payable in local currency.

The special surtax on beverage sugar content, initially set at US$0,002 per gramme from January 1, 2024 and later reduced by half, has been waived until February 8, 2024 and companies that had settled their obligations at the initial rate would have an option of having their accounts credited against future tax obligations.

Minister Ncube extended VAT exemption on proposed live cattle, pigs, goats, sheep, bovine semen, poultry meat, and kapenta, major sources of protein, with effect from August 1, 2024 to encourage their trading in the formal market.

He noted the recent imposition of VAT on live animals and meat had negatively impacted the livestock industry in Zimbabwe.

Due to economic hardships caused by drought, demand for meat has declined, and small-scale farmers, who form the majority of livestock producers, are struggling to register for VAT due to low sales volumes.

This has led to a surge in informal trade, where middlemen use toll slaughtering to evade taxes, compromising meat safety.

With only a third of chicken production sold through official channels, the remainder comes from small farmers who rely on this for income. Removing duty on poultry would encourage more chicken meat to be sold officially.