New taxes insensitive

industrial production may be viewed as ultra-capitalism that, in Zimbabwe’s case, has historically worsened poverty, increased inflation and caused shortages.
Although some limited benefits may be drawn from protectionism, we now know that the reasons accompanying such policies as proffered by the Ministry of Finance, Zimra, and business are lies sanitised.
Evidently, most of these policies are mainly designed to raise money from a people already overburdened by one of the world’s highest tax regimes.
The latest charge by Zimra to levy 25 percent surtax, an additional tax on already existing taxes, on imported second-hand vehicles, alcohol, food, tobacco, electrical gadgets, cosmetics and clothing is just another well-calculated fund-raising venture. There is already a cocktail of import and excise duty hikes on most of these products anyway, effective this January, as announced in the National Budget last year.
The increased duties, as high as 40 percent, and expanded to cover previously exempt products such as basic foodstuffs, do not come cheap. After raking in US$2,8 billion net revenue collections last year, it is clear Zimra is intent on expanding its revenue base.
There is a US$4 billion 2012 Budget to take care of, which has potential to expand, and in the absence of other revenue sources, Zimra comes in handy. From the foregoing, it is evident, the insulation of the local manufacturing industry from competitive imports is remotely associated with such irregular tax reforms.
From another perspective, stiffer import duties dressed up to appear to shield local producers from foreign competition could easily be regarded as anti-people and anti-social policies. Given that in excess of three- quarters of employable Zimbabweans are in informal employment, and several of them, especially women sustaining families via cross-border activities, higher taxes will only end up hurting the ordinary people.
Secondly, contrary to protectionism, competitiveness would be key. Zimbabwe, which is a member of Sadc and Comesa, is currently gearing towards a common market and free trade area with its partners in the two economic blocs within the next few years. Economic integration of this nature will eliminate tariffs and open the domestic market to exceeding foreign competition. If the manufacturers should be protected, then they must be insulated from their own incompetencies and endemic sloppiness to adjusting to rapidly changing global trends in production and trade. Instead of treating local companies with kid gloves, Government efforts must be re-directed towards promoting production of finished quality goods, which improve export competitiveness.
The world is shrinking, and now some call it a global village. That means domestic firms must be able to compete on an equal footing, shutting away competition from imports through stiffer taxes will be ineffective. If Government is so concerned about the impact of foreign products on the local industry and wants to intervene, it can do so by providing subsidies to manufacturing companies.
Similar strategies have worked well in other strong economies elsewhere. Sugarcane growers and other farmers are subsidised in the US, which increases the competitiveness of their products at world markets. Chinese manufacturers receive heavy subsidies, and of course, aided by an undervalued exchange rate, produce some of the most competitive exports in the world. Now, let’s take for instance the tired excuse of promoting and protecting the local car manufacturing industry. What the taxman, or woman, is in fact referring to here is the local car assembling line at Willowvale Madza Motor Industries (WMMI) in Harare. It is a fact that there is no car manufacturing industry to talk of at all in the country, and therefore, by the same token, no industry to nestle.
This car manufacturing euphemism is a far-fetched, clearly and deliberately designed to raise money from higher vehicle import duties and make sure most Zimbabweans remain pedestrians. Even when the vehicle-assembling sector was protected from outside competition, WMMI products spite the poor. Most of its vehicles cost upwards of US$20 000 when one could import a small car from Japan, duties inclusive, for just US$5 000. It would take an average public servant earning US$250 monthly a solid nine years to buy a Madza 3 from WMMI costing US$27 000.
This premise is based on the assumption that this particular civil servant foregoes paying rent, rates and buying food, etc.
For several reasons, the domestic industry has not been sufficiently competitive. Foreign competition from cheaper imports is just one of the minor reasons for dragging industry capacity utilisation to as low as 10 percent in the last few years. And yet over the last decade, several taxing reforms have been crafted and implemented to reward incompetence from the local manufacturing sector. Zimbabwe’s poor have paid dearly for such anti-people policies.
Price increases and shortages have been the result of excise and import duty hikes on products such as food, carried out in the name of promoting and protecting manufacturers at home.
In 2008, official statistics recorded the country’s annual inflation at more than 4 000 percent. Others predicted it was in the millions. However, there is need in some respects to protect the local industry and consumers from turning into a dumping ground.
There are several instances where Zimbabwe has been used as a dumping ground for sub-standard cheap products, especially clothing, from Asia.
Such practices short-change consumers, affect sales and profitability for domestic producers and are in general detrimental to the economy.

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