EDITORIAL COMMENT: Pro-growth prudent Budget hits cheats

26 Nov, 2021 - 00:11 0 Views
EDITORIAL COMMENT: Pro-growth prudent Budget hits cheats Minister Ncube

The Herald

Once again Minister of Finance and Economic Development Mthuli Ncube has presented a detailed package in the 2022 National Budget designed to consolidate the economic progress already made under the Second Republic and to accelerate the momentum of economic growth while ensuring that basic services are maintained and improved.

The guiding light all along has been fiscal prudence and a realisation that everything we want has to be paid for, by us as taxpayers and fee payers, but given that, and it is only since the Second Republic that this has been chiselled in the rock, we must then make best use of the money, ensure that everyone pays their fair share, and kill all corruption and cheating.

While many as individuals and businesses like to concentrate on what happens to their tax burden as a result of the budget, and what services and benefits they get from the spending, the whole package is what is important and needs to be considered.

For a start the personal income taxpayers are getting their expected benefit from the annual movement of tax bands which basically takes into account inflation. 

The tax-free band goes from $10 000 a month to $25 000 and you only enter the top 40 percent band as your income rises above $500 000 a month. 

We retain the position that while almost everyone earning an income outside domestic workers and pavement vendors probably has to pay something, most people are inside the low-rate bands so do not pay that much, with the chunk of their income that has to go on absolute essentials being taxed at zero percent. 

He has also doubled, in US dollar terms at that, the portion of an estate of a dead person that no longer attracts death duties. A reasonable house now can be inherited without these duties.

On the other hand, the Minister wants to see everyone earning an income making contact with Zimra, the tax collectors. 

He has raised the withholding tax that has to be deducted from payments to those who are not registered and up-to-date taxpayers from 10 percent to 30 percent. 

This is being done not so much to raise more revenue, but to push these small contractors into the Zimra fold since they will almost certainly pay less if they sort out their taxes, only pay what they need to, and then keep up their business records and make their regular payments so they get their compliance certificate.

The Minister and his team seem to have been investigating a lot of other scams and potential scams, because there is quite a lot of loophole filling in this Budget. 

These are measures that do not affect the person or business who has been compliant, but will hit those who cheat rather hard. 

VAT taxpayers, for example, must now have their equipment integrated with Zimra if they want to be listed as compliant, fairly essential for most businesses. Mobile service companies will have to pay a deposit of US$50 for each new handset they register, but get it back with 30 days if someone paid the import duty on the phone. 

And so it goes. There will even be a whistleblower’s reward of 10 percent of collected revenue for handing over a tax dodger.

These measures are important for several reasons. First they do ensure that if you should pay taxes it becomes ever more difficult to avoid these, so the Government makes more money.

But far more importantly they bring a lot more fairness to society, instead of a far too large percentage of the burden by those on PAYE and other taxes that cannot be dodged. And in the end they can even reduce the burden on the complaint.

On the tax side there is modest relief on the tax bands and the bonus payments, and no one will be surprised to hear that civil servants will as a result be getting their foreign currency bonuses tax free, but far more stress on making sure that everyone who owes Zimra money pays that money instead of treating the honest as suckers.

When it comes to spending, the Minister continues to believe that you spend what you get. In theory there is a 0,5 percent deficit, which we have seen in his last two budgets and each time he came out with a surplus since he never hopes for the best and often prepares for the worst.

That alone will continue to lower inflation rates, backed by the prudent monetary policies at the Reserve Bank of Zimbabwe, and with exports continuing to exceed imports will see relatively stable exchange rates. 

There was some slippage in inflation when the black market rate rose, but the main reforms of eliminating backlogs in the auction system and routing out cheating have put the falling inflation back on course with just what amounts to a modest delay.

Government spending still follows the correct practice. This year capital spending will very slightly exceed staff costs, while next year staff costs will very slightly exceed capital spending. 

Both a little over 30 percent of the budget with the final third going on services and the like. This year staff costs went 10 percent over budget with 3 000 extra teachers and 1 000 extra police added to the regular increments. 

Next year there are plans for an extra 10 000 teachers, with both education ministries well represented in the capital spending on new schools, new school buildings and a resumption of building programmes at universities.

Civil servants are also going to start seeing fulfilment of non-salary benefits. A total of $1,5 billion has been budgeted for civil service housing, two thirds of it for junior officers. 

Health, undergoing a major revamp since the arrival of Covid-19, continues to win with the total spending rising to 14,9 percent of all spending. 

As usual the three big ministries, all almost on par, are those for Agriculture, Health and Primary and Secondary Education. 

But a lot of other Government programmes are being sorted out in the budget, everything from more funding for those banks that make small loans to women and youths to a larger slice for devolution as people get to choose the capital works their areas want and need.

So while it is a lot of the same, only better, much of this same is what we have been seeing over the past two and a bit years as the Second Republic follows the course of development evenly spread so that all win and no one is left behind.

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