HomeBusiness Digest‘Proposed tax regime punitive’

‘Proposed tax regime punitive’

A THREE-MONTH old baby was killed in Masvingo on Monday after being run over by a city council truck, sparking protest in the country’s oldest city, according to media reports.

Taurai Mangudhla

The baby’s mother, one of millions of Zimbabweans who have either never known formal employment due to the high rate of unemployment which exceeds 80% or lost their jobs as a result of deindustrialisation, faces an ever worsening operating environment as government mulls introducing new taxes that will cut across the board to include informal traders.

This week our sister paper, Newsday, reported government was planning to introduce a raft of new taxes targeting every Zimbabwean whether formally employed, self-employed or not employed in a bid to fund the proposed compulsory health insurance scheme.

Under the proposals, every Zimbabwean, regardless of age, would be taxed even for mobile phone use, according to the report.
Health and Childcare deputy minister Paul Chimedza is quoted as saying his ministry will propose to collect levies from tollgates given that a lot of funds go into looking after accident victims as part of measures which he says will revolutionalise financing of the country’s healthcare system for the betterment of all ordinary citizens.

However, economists argue the introduction of new taxes in the absence of accountability on the part of government and developing citizen’s capacity to pay taxes will not yield any meaningful results.

Economist Takunda Mugaga said introduction of new taxes would be an unfortunate development for Zimbabweans as it would deepen poverty as opposed to bringing tangible economic benefits.
He said the move was doomed, much like “trying to grow a plantation in the desert”.

“Those in the informal sector want to be formalised and when you widen the tax base you discourage that,” Mugaga said in an interview. “There is a misconception that people in the streets are getting enough when they cannot afford rentals and basics, so why tax the small informal trade to death?”

“It’s like expecting milk from a cow that has never given birth to a calf or expecting milk from a cow that you have never provided grazing land for.”

Mugaga argued that instead of widening the tax base, the Zimbabwe Revenue Authority (Zimra) should accept that people have no capacity to pay taxes as their businesses are shutting down due to macro-economic hardships and controversial policies such as indigenisation .

“The reason Zimra cannot collect is that there is just no economy to talk about. Companies are not paying not because they do not want, but because they just can’t. The Zimra guys are not being open to their employer because of patronage and I think (Zimra commissioner general Gershem) Pasi should just be honest.”

Instead, Mugaga said, government should be focusing on growing the economy and dealing with issues that retard investment such as indigenisation and corruption.

“We can’t afford to do anything else except to grow the economy. Some people have institutionalised corruption and they think it is their privilege to amass wealth because they are ministers.”

Following Zimra’s clampdown on companies that owed taxes to treasury, SME Association of Zimbabwe chairperson Farai Mutambanengwe warned government’s crackdown on small to medium enterprises for taxation purposes would adversely affect the sector and only motivate evasion.

Former Justice Deputy Minister Obert Gutu said piling on more taxes on an already overtaxed populace was in bad taste both legally and morally.

Gutu said concerned taxpayers should consider filing appropriate Constitutional Court applications challenging the constitutionality of a tax system that is financially punitive and morally repugnant, particularly so when the taxes are largely not used for legitimate purposes “as is currently the position in Zimbabwe”.

“There is Pay-as-You-Earn, there is Value Added Tax, there is the Aids levy, there is the rural electrification levy as well as National Social Security Authority contributions. However, unlike in other countries where taxes are used for capital projects such as the construction of bridges, dams, hospitals, schools etc, the Zanu PF government is obsessed with buying posh cars such as Mercedes Benz limousines and Land Rover Discovery utility vehicles,” he said.

Gutu said the Zanu PF government has a sordid record when it comes to issues of management of taxes and other state resources. He said taxes have hardly been used for the benefit of the majority of the people but mainly for the self-serving and corrupt benefit of the ruling elite.

“This is why there is unprecedented infrastructural decay coupled with institutionalised corruption and general governmental dereliction of duty and responsibility,” Gutu said.

“This Zanu PF government is not fit for purpose and you can only trust them at the people’s peril. Put simply, there shouldn’t be any additional taxation of the long-suffering and poor people of Zimbabwe until such a time that we have put in place a government that genuinely cares about the people’s welfare.”

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