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Tone set for 2015 national budget

FINANCE minister Patrick Chinamasa’s 2015 national budget is expected to be delivered in the next two months against a backdrop of an array of tax reforms in mid-term fiscal policy review statement.

Taurai Mangudhla

Chinamasa’s tax measures, via a move which according to Speaker of parliament Jacob Mudenda was unconstitutional, have been greeted with acute criticism.

Chinamasa increased excise duty on diesel and petrol from 25 US cents and 30 US cents per litre to 30 US cents and 35 US cents per litre respectively, with effect from September 15.

Apart from the increased duty on petrol and diesel, Chinamasa also levied excise duty of 5% on airtime for voice calls and data. He also proposed to levy customs duty on mobile handsets at a rate of 25%, with effect from October and increased rentals on government properties.

The finance minister also raised duty on a wide range of imported finished products, including cooking oil, poultry, soap, maize meal, flour, beverages, dairy produce, furniture, sugar, fresh and canned fruits and vegetables, among others, saying they were accelerating collapse of the local industry and unnecessarily ballooning the country’s import bill which stood at US$3 billion in the first six months of 2014.

The new taxes have been widely viewed as a desperate attempt to raise funds at a time revenues are dwindling while budgetary demands are growing.

According to latest statistics government, revenues were below target in the first half of the year, while expenditures exceeded budget due to growing non-discretionary spending. Similar spending patterns are expected to persist in the last half of the year.

As the figures show, cumulative revenue collections for the period January to June 2014, stood at US$1,735 billion. The figure was 6,1% below projections, while expenditure amounted to US$1,953 billion against targeted expenditures of US$1,848 billion, largely due to loan repayments and an increase in the wage bill.

Analysts say the mid-term fiscal policy statement has set the tone for the 2015 budget.

Econometer Global Capital head of research Takunda Mugaga said the 2015 budget would not be that much different from the mid-term review given that the time lag for substantial policy changes is now too short.

He said the budget was unlikely to see more taxes introduced because the people are already overtaxed.
“The minister however made a mistake of revising downwards royalties was minerals. With appetite for mining from Russians and Chinese of late, it was supposed to coincide with rising of royalties to deepen revenue base,” said Mugaga.

Independent economist John Robertson said the mid-term statement and the upcoming national budget would be largely ineffective because of persistent macroeconomic challenges that require a major policy review.

The economist said there was need for clarity on the indigenisation policy with amendments to the existing Act where necessary.

“The difficulties we have are polices and they are still unattractive to investors. Unfortunately, the budget is for immediate issues such as how to raise more money and allocate the available resources,” Robertson said.

“The mid-term fiscal review is going to be largely ineffective; going forward it would be to critical to reduce government expenditure, especially on wages.”

Roberstson argued increasing taxes alone would not address the country’s budget deficit. He said government should reduce the civil service head count by 20 000 employees to create some breathing space.

“Japan’s population is 120 million and yet it has 300 000 civil servants which is almost the same number we employ. The private sector is reducing its labour so why shouldn’t government, which doesn’t generate profit, do the same?”

The International Monetary Fund recently proposed Zimbabwe should cut down its wage costs which are above 70% of the budget.
Government expenditure for the first half of 2014, inclusive of loan repayments, amounted to US$1,953 billion, according to Chinamasa against targeted expenditures of US$1,848 billion mainly on account of support to additional employment costs and loan repayments.

“The outturn on employment costs of US$1,486 billion for the first half of the year was against the background of the remuneration review, effective January and implemented in April 2014,” Chinamasa said.

Employment costs, which were originally targeted at US$1,41 billion or 72,8% of total expenditures for the period January to June 2014, expended US$1,486 billion or 76, 1% of total expenditures, surpassing the target by US$75,2 million.

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