adminJohn Sigauke
In his 2014 Mid-Year Fiscal Policy Review presented to Parliament on 11 September, Minister Patrick Chinamasa proposed a number of measures that will enhance revenue inflows and counter the revenue shortfalls bedevilling the nation. Most of the revenue inflow measures proposed are quite exciting though few needed a bit of consultation.
Minister Chinamasa proposed to levy customs duty on mobile handsets at a rate of 25 percent, with effect from 1 October 2014. This is in addition to his proposed levy excise duty of 5 percent on air time for voice and data. This appears to work at cross purposes with the Government’s intention enshrined in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset) of improving accessibility to communication.
Before this review, Government had reduced rates of customs duty on ICT gadgets with effect from 1 August 2009. This was to increase access to information as an essential tool to improve decision making in the global village, and also to encourage the development of Information Communication Technology (ICT), in line with international trends.
Minister Chinamasa lifted the waiver on the assumption or basis that the same has achieved its purpose. According to the minister, mobile telephone penetration rates have increased to106,4 percent.
If that claim is anything to go by, then the tax reduction has indeed achieved its intentions. However, I am not very sure if this is the right time to lift the waiver.
While the mobile penetration is said to be over 100 percent, the use of internet data services as of June 2014 was still lagging at 43,1 percent. This shows that people still have basic mobile handsets that only allow them to carry out basic functions such as receiving and placing calls. This is not enough if we sincerely want to enhance decision making in the global village.
The tax amnesty on mobile handsets should have continued until the use of internet data services has reached at least 75 percent. At that rate, we can then pride ourselves of having developed ICT in line with the international trends.
The negligible use of internet shows that the general populace still can’t afford to buy sophisticated or smart mobile handsets that can enable them to surf internet. With the 25 percent customs duty, the smart phones are going to be further drawn out of their reach.
Smart phones have become an absolute necessity for people. Apart from receiving and placing calls, users must be able to store data, take pictures, access email, and stay in touch with business associates. The cell phones must change the way people organise their business and social occasions.
It must revolutionise the education system in the rural areas of Zimbabwe. A pupil in Muhlanguleni should be able to research on internet using the cell phone. Internet use has not reached that ideal magnitude.
In any case, if the mobile penetration is now over 100percent, the 25percent custom duty will not pay much dividend to the fiscus. What it means is that the market has been saturated and very few mobile handsets are needed.
The mobile business had created employment in Zimbabwe. A visit at Gulf complex and other complexes and small shops around towns and cities can bear witness to this assertion. I am not sure if the trips to Dubai and China will continue under the proposed tax regime. This is most likely going to impact negatively on the employment that had been created.
However, the introduction of tax on mobile handsets should provide a window of opportunity to the local firms that assemble the same locally. The introduction of tax protects them from external competition. They must begin to have prices that reflect an advantage offered to them through the tax regime.
One of the strategies proposed in the Zim Asset to improve access to communication is to engage the private sector on the Private-Public Partnerships (PPPs). Government should seek partnerships with local or foreign firms in assembling mobile handsets and other ICT gadgets. These gadgets must be naturally cheaper than foreign ones.
More often, the local firms do not reflect this competitive advantage in their pricing system. Ordinarily, a product that is not taxed must be cheaper than those that are taxed.
This is the same case with ethanol blended petrol. Being a local blend, E10 and E15 must be substantially cheaper than the imported petrol. This is not what is obtaining and the reason that explains the vicious resistance of the blend.
Zimbabwean entrepreneurs should desist from making unjustified mega profits. The ethanol blended fuel must be substantially cheaper, more so now with the five cents increment on the exercise duty on the imported petrol and diesel.
Online Reporter