Reserve Bank governor Gideon Gono and Finance minister Tendai Bit have been on a crusade of financial inclusion.
Candid Comment with Itai Masuku
They mean the same thing but perhaps for different reasons. For the Reserve Bank financial inclusion refers to the “unbanked”, basically people who do not have bank accounts.
Reasons for this may vary from not having readily accessible banking facilities, as might apply to rural areas or simply not earning enough to justify a bank account. On the other hand treasury is more interested in getting those funds into its own coffers.
Both men have a problem with the fact that at any given time, for the same amount that circulates officially in Zimbabwe, through the banks, almost an equivalent amount is circulating outside the system.
That means neither Gono nor Biti have access to those funds. Blue chip Innscor has an axiom that goes; “follow the money”. And as anyone can see, these guys do follow the money.
Following that maxim, one decided to examine where the money has gone and found what one may liken to Charles Dickens’ Tale of Two Cities. In one aspect of our country we have the classical Marxist Leninist scenario where wealth (and in our case liquidity) is concentrated in the hands of a few.
This is the economy of the people whom we see speeding around in huge automobiles with V8 and four-litre-plus engines running on petrol at that. Many of them live in mountain-built mansions, are in the process of building some or are renovating them for the umpteenth time.
If we call to mind what ended up being dubbed the “Warren Buffett tax proposals” that US President Barack Obama mulled on for the better part before his re-election campaign, we can draw some parallels with our own situation at home.
These super rich pay a very small proportion of their income towards tax. In fact, the supercars and mansions may be means of avoiding tax. This leaves the only remaining tax base as the “unbanked”. This is the second part of our tale of two countries.
It’s now difficult to call them the working class, or proletariat, given the dismal unemployment levels in the country. Experts tell us those in formal employment in the country amount to 800 000 people, out of Zimbabwe’s approximately 12 million, a mere 6,7% of the populace. The rest are the unemployed, semi-employed, or self-employed.
The last category therefore constitutes the remaining tax base. I call this the dollar economy because here, most things are sold for a dollar or less. If government wants to follow the money immediately, this is where they should go. However, morally this is unsound as it implies robbing the poor to give to the rich.
Politically this is calling the devil from the vast deep. But there are proposals to amend Zimbabwe’s tax laws, and a cursory glance suggests, like the Buffett proposals, the net may be closing in not so much on the bottom tier economy but on the fat cats who have enjoyed the reverse of the Robin Hood phenomenon.
Excellent as always…but then do not hold your breath these guys with their high end cars are UNTOUCHABLE. You do remember the mid eighties when the department brought in tax experts from Australia? There was the proverbial gnashing of teeth..Maybe the authorities might do well to consider round two. Another area that makes me weep is the border where most of the products in supermarkets killing local industry are not paying anything to cross the Limpopo..sad sad sad..
The issues of Tax are very interesting Tapiwa. The tax system is based on the philosophy of utmost good faith where everyone is expected to declare all the income that accrues to him/her. Other taxes such as VAT, and royalties are paid/deducted on the spot in other words when the transaction is conducted. For those who conduct tneir businesses through properly authorised dealers spot taxes work very well hence the reason why VAT has remained the largest contributor to tax. An important aspect about VAT is that it is not dependent on the seller to decide whether or not it must be paid as what happens to Customs n Exercise duty where leakages are rampant The real problem is on transaction that are conducted outside the official channels, particularly in the informal sector. The reason why the powers that be are not worried by the closure of large businsesses is because they are the informal sector. The closure of formalised businesses do not necessarily remove the demand for its products, ratner it transfers the market to theinformal sector. This is why the money is in the informal sector, a business segment which is unregulated. The problem however is that this section of the economy has never ben part of our statistics. Tteasury is faced with dwindling sources of revenue and instead of tuckling the problem head on, they are misdirecting their attention. While SMEs contribute significantly to e,ployment of underpaid employees. Their contribution to GDP is not as high. I am sure u are aware of the USA statstics which indicate that 99% of all businesses there are small while the less then 1% large businesses contribute more than 52% of GDP. So the money is in organised businesses which use the banking sector contributeto tax, engage in projects that develop the country and their transactions can be subjected to inpections/audits by authorities. Large businesses also get the money from the informal sector on behalf if government through trnsactions they conduct with SMEs. A good example being Inscor and most steel merchants. Infact all materials used by the informal sector are obtained from the formal sector. Our fight must be concentrated on growing large businesses although it will be resisted by the fat cats.