Kudzanai Sharara Assistant Business Editor
The Transitional Stabilisation Programme recently announced by Finance and Economic Development Minister Mthuli Ncube is a sound fiscal adjustment programme and, along with the amended 2 cents tax, must be implemented immediately as a way of dealing with the country’s damaging fiscal imbalances, a leading industrial body has said.
Within the last two weeks, Minister Ncube announced two fiscal measures to deal with fiscal imbalances as a way of restoring macro-economic stability.
The measures include a 2 cents tax per dollar transaction that was met with mixed feelings by stakeholders.
The Confederation of Zimbabwe Industries (CZI) said yesterday that the 2 cents tax, which was later amended and can still be fine-tuned, was necessary.
“The proposed 2 percent (cents) transaction tax is designed to close the fiscal deficit and restore confidence in the RTGS system,” said CZI president Mr Sifelani Jabangwe, who spoke on behalf of the business grouping in the presence of representatives from the Oil Expressers Association of Zimbabwe, as well as representatives of the Zimbabwe Sugar Association.
“As a matter of principle, economies are not developed through over taxation. However, we recognise that this tax was aimed at widening the tax base and is vital for arresting the fiscal deficit which must be dealt with immediately.
“The 2 cents tax as subsequently modified by the Minister of Finance on the 5th of
October, with of course further adjustment in consultation with the private sector, should go a long way in closing the fiscal deficit and restoring stability to the economy.”
Mr Jabangwe said the tax was necessary as a short-term “shock-therapy measure for the economy”.
“We, therefore, call on stakeholders to accept this painful necessity to stabilise the economy, we also call on Government to play its full part in stabilising the economy and sharing the associated pain by implementing the measures as outlined in the TSP and returning to zero deficit position as soon as possible,” he said.
Mr Jabangwe said since the tax was inflicting pain on the entire economy, and assuming collective responsibility to correct errors of the past, the Government was obligated to be fully transparent by accounting for the collections and use of the tax.
“We must point out that this tax is not sustainable over a period of time as it taxes each stage of the value chain and negatively affect the growth and competitiveness of the value chains,” said Mr Jabangwe.
In light of this, Mr Jabangwe proposed that the tax expire by December 2019 and this should be done through a time bound legislation to demonstrate Government’s sincerity and give the market confidence.
The second set of measures were announced under the Transitional Stabilisation Programme TSP), and were seen by Mr Jabangwe as necessary for the country’s economic growth and development.
“We welcome the following measures as highlighted in the TSP and implore Government to implement these immediately,” he said.
Mr Jabangwe highlighted some of the measures, including those that were meant to right size public employment, cutting travelling expenses, reducing fuel benefits and curtailing vehicle acquisitions.
He said the CZI also supports Government’s decision to issue treasury bills through market based auctions and limiting new releases to the minimum required for fiscal purposes.
Limiting Government’s overdraft with the RBZ to the statutory levels required by law, as well as accelerating and restructuring the privatisation of state owned enterprises are some of the measures that were also supported by CZI.
Mr Jabangwe said the CZI was also in support of Government’s plans to eliminate budgetary support to state owned enterprises as well as using instruments such as guarantees to support them where justified.
He said the industrial body was also in support of plans to right size Government staff, including action such as retiring all civil staff that are at retirement age and above.
The CZI also supported plans to move to a market based foreign exchange allocation system which is different to the current system which is modelled along lines of a priority list.