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Auxilia Katongomara, Chronicle Reporter
FINANCE and Economic Development Minister Professor Mthuli Ncube is expected to present the 2019 national budget statement on November 22 highlighting fiscal reforms aimed at propelling Zimbabwe towards a prosperous and empowered upper middle income nation by 2030.
Treasury recently presented its pre-budget Strategy paper highlighting a number of austerity measures.
Responding to questions in Parliament on Wednesday, Prof Ncube explained the two percent tax and said legislators would have to wait for their allocated vehicles.
On when legislators would get their vehicles, Prof Ncube said he would respond to that when he makes the budget pronouncement.
“I am going to be presenting a budget statement at the end of November on the 22nd – that is the date we have proposed. Then at that stage, I will be able to say when I am able to provide Members of Parliament with transport.
“I am acutely aware of the important work that they do – they do very good work. We will support them as much as possible but as of now, I am not yet ready to buy and provide them with those vehicles. I will do so in the fullness of time,” said Prof Ncube.
He said some of the austerity measures are contained in the Pre-Budget statement and he would have the opportunity to discuss further with legislators during the pre-budget seminar next week.
Mr Tendai Biti of the MDC asked why Prof Ncube introduced the transaction tax of 2 percent to the people of Zimbabwe when the challenge and obligation should be on expenditure curtailment and not looking for more resources.
Prof Ncube said when it comes to the strategy for reducing expenditure and increasing revenue, one needs to be innovative and the ultimate goal is to reduce the budget deficit.
He said the rationale behind the introduction of the two percent tax was that the economy had informalised.
“When an economy is informalised, Mr Speaker Sir, one should design a tax instrument that is inclusive, that also touches on the informal sector. So, we decided to introduce an electronic transaction tax in the way that we proposed it but also we put exemptions because we are acutely aware that there is our population that is at the bottom of the pyramid, to use that phrase, transactions of $10 and below should be exempted, otherwise the tax becomes regressive,” responded Prof Ncube.
“At the same time, we are acutely aware that corporates are also providing jobs. They are responsible citizens and they are paying taxes. There should be a cap on the amount of tax they pay overall through this 2 percent transactions tax”.
Prof Ncube there was a list of other exemptions, for instance for pensions, equity investments, money market among others.
“So, we believe that this tax will go a long way in making sure that we have an inclusive tax system. A tax system that will also help us stop the bleeding in terms of the size of the budget deficit and I will quickly switch to cost containment measures, that is cutting Government expenditure which I will announce at the time of the budget,” he said.
Mr Biti said the introduction of the tax was retrogressive as people are actually in a recession and need to spend.
“First of all, Zimbabwe is not the first country in Africa or in the world to introduce this kind of tax. In other countries, the tax rate is even higher. It is much higher in other countries and two percent is not as high as in other countries. Secondly, the tax is not retrogressive. On the contrary, it is progressive and I will explain.
“The previous tax did not take into account the value of the transaction and that is why we amended it. It was really that you pay the same amount per transactions regardless of the value. This time around, it is linked to value. So, it is progressive in that sense. We actually corrected a regressive situation and turned it into a progressive tax. Honourable Speaker, it is also not correct to argue that the economy is in a recession. The economy is not in a recession,” responded Prof Ncube.
He said the strategy to reduce the deficit is meant to deal with expenditure control on the part of Government.
“The RBZ overdraft facility currently stands at about $2,3 billion. We have a strategy for dealing with it. We are aware and have already made it public that this is well above the 20 percent target where it should be in terms of expenditure for the previous year. It should not be more than 20 percent and we are way above that. We have acknowledged this in public and I have said so. We have opened books on this,” Prof Ncube said.
He said in terms of strategy for dealing with the overdraft, they were going to curtail Government expenditure, tighten screws on unremitted taxes which stand at $2,3 billion from ZIMRA among others.
— @AuxiliaK
derick.khumalo