Business

Editor Memo: 2024 Budget: Reduce tax burden – NewsDay

The burden of high taxes in the country is taking a toll on various sectors of the economy and ordinary people, particularly those in the formal workforce.

FINANCE and Investment Promotion minister Mthuli Ncube will present a national budget sometime this month.

Every Zimbabwean is waiting with bated breath to see what is in store for business and ordinary people.

Zimbabweans are hoping it will not be like the 2023 national budget, which many said was anti-poor.

The message to Ncube, as he finalises the budget preparations, is to please give Zimbabweans a relief, for once.

Zimbabweans face exorbitant taxes.

The burden of high taxes in the country is taking a toll on various sectors of the economy and ordinary people, particularly those in the formal workforce.

With the upcoming budget, it is crucial for Ncube to propose measures to alleviate this burden. The most glaring issue is the heavy taxation on formally employed individuals.

The Pay As You Earn (PAYE) system is one of the primary sources of government revenue, but the high tax rates are squeezing the pockets of those who are already struggling with economic challenges.

It is imperative to reconsider the tax brackets and thresholds to provide some relief for formal employees. Raising the tax-free threshold is an immediate necessity, ensuring that basic livelihoods are not subjected to unnecessary financial constraints.

Another significant concern is the intermediated money transfer tax (IMTT), which places an additional financial burden on ordinary Zimbabweans for every transaction they make.

Ncube should not turn a deaf ear to appeals by business and labour to repeal the IMTT.

In November last year, Ncube cut IMTT on United States dollar transactions from 4% to 2%. It was further reduced to 1% in June this year.

The Zimbabwe Investment and Development Agency said in July: “The rate was reduced from 2% to 1%, a decision, which the Agency considers as a step towards the right direction. Lowering IMTT tax will positively impact ease of doing business in Zimbabwe and the Agency can only hope for the tax to be reduced to 0”.

The call from business in the past few weeks has been for government to scrap IMTT and reduce various taxes across sectors.

The IMTT has been a source of constant pain to an already overtaxed and overstretched consumer.

The Treasury has always been more focused on beefing up government’s war chest at the expense of millions of suffering Zimbabweans.

While the government sees the 1% IMTT as a cash cow, it has become an albatross around the necks of ordinary Zimbabweans, who are barely making ends meet — it has added an extra burden on the unravelling budgets.

The dramatic decline in living standards has turned the daily lives of most Zimbabweans into an unbearable pain.

These are bread and butter issues that need to be addressed.

When the tax was introduced, everyone thought it would be a stopgap measure for the government to improve its revenues before removing it.

Ncube should consider revising this tax to encourage financial inclusion.

Zimbabwe is also grappling with one of the highest tax burdens globally.

High taxes can deter businesses and entrepreneurs from investing and expanding in the country. The government should work towards creating a more conducive tax environment for businesses across various sectors.

Lowering corporate taxes, offering incentives for job creation, and simplifying tax compliance procedures can stimulate economic growth.

To foster trust and transparency in the tax system, it is essential for the government to allocate tax revenues efficiently and effectively.

Ensuring that taxpayers can see tangible improvements in public services, infrastructure, and social welfare programmes will go a long way in garnering support for the tax system.

The cost of living continues to spiral out of control. Prices of goods, including basic commodities, critical medical drugs and rentals have soared in the past months.

The macroeconomic situation remains volatile. It negatively affects livelihoods and access to food, especially among poor households.

This is compounded by the United States dollar being the preferred currency of trade.

We hope Ncube does not have plans to increase value added tax (VAT), another source of pain. Instead, he should reduce it.

It is crucial for the Finance minister to strike a balance between generating government revenue and providing relief to ordinary Zimbabweans, who bear the brunt of high taxes.

Business

Mthuli squeezes consumers, businesses – NewsDay

In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.

GOVERNMENT yesterday announced a cocktail of tax increases, pushing up the cost of living and ease of doing business after reviewing its 2024 revenue projection upwards by 22,22% to ZWL$53,9 trillion.

In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.

Treasury initially projected revenue collections to total ZWL$44,1 trillion for the 2024 fiscal year.

“Mr Speaker Sir, in line with the projected economic growth of 3,5%, total revenue collections in 2024 are estimated at ZWL$53,9 trillion, (18,3% of GDP), broken down as ZWL$51,2 trillion tax revenue and ZWL$2,7 trillion non-tax revenue,” Ncube said.

“Guided by the expected revenue envelope and the desired fiscal path, expenditures in 2024 are projected at ZWL$58,2 trillion (19,8% of GDP).”

Ncube announced an upward review on the Strategic Reserve Levy by US$0,03 and US$0,05 per litre of diesel and petrol, respectively, with effect from January 1, 2024, pushing up the cost of fuel.

Ncube also raised tollgate and passport fees beginning next year.

“I, therefore, propose an upward review of toll fees on premium roads, that is, Harare-Beitbridge and Plumtree-Mutare and other roads, with effect from January 1, 2024. Revenue derived from the increased fees will be remitted to the Consolidated Revenue Fund,” Ncube said.

“I, further, propose that passport and selected fees charged by the Central Vehicle Registry be increased, with effect from January 1, 2024. Additional revenue generated from the above measures will be ring-fenced towards road infrastructure development.”

Ncube also introduced a US$0,02 levy per gramme of sugar contained in beverages, a development that will push up the prices of beverages.

He said the move was in response to growing concerns on the adverse effects of the consumption of sugar contained in beverages. Tax on beverages has also been implemented in a number of countries, including in the Southern African Development Community.

Ncube also introduced a new wealth tax to ensure that high-income earners pay taxes.

“In order to ensure that every person contributes to the fiscus in line with their levels of income. I propose to introduce a wealth tax levied at a rate of 1% of market values of residential properties with a minimum value of US$100 000,” he said.

“Resources derived from the levy will be ring-fenced towards urban infrastructure development, in particular roads, water, sewer and community health centres. Principal private residential properties owned by elderly persons above 70 years will, however, be exempt from the tax.”

While the minister reviewed the tax-free threshold on incomes to ZWL$750 000, from the previous ZWL$500 000, inflation has rendered the move mute because of the rising cost of living.

Ncube also targeted foreign companies by introducing the domestic minimum top-up tax (DMTT).

The tax ensures that qualifying entities located in Zimbabwe with an aggregate effective tax rate below 15% be charged a top-up amount, raising the cost of doing business.

“Under the GloBE Tax Rules, where a tax incentive results in an effective rate of less than 15%, the tax jurisdiction where the multinational is headquartered collects the difference between the effective tax under the tax incentive and the minimum effective rate of 15% (the top-up tax),” Ncube said.

“The DMTT allows the country where the low tax profits arise from the tax incentive to collect the top-up tax rather than ceding taxing rights to the headquarter jurisdiction.”

He said the calculation of the DMTT would be based on the effective tax rate charged on the jurisdictional profits, not the jurisdictions’ statutory corporate income tax.

“I, therefore, propose to enact DMTT rules to guard against ceding taxing rights to foreign jurisdictions on top-up tax arising from tax incentives that are provided to those investments,” Ncube said. The corporate tax rate was also reviewed upwards to 25% from 24%.

Ncube, however, reduced the mandatory value added tax (Vat) registration threshold to US$25 000 from US$40 000, starting next year.

Operators with a minimum annual turnover of US$25 000, or local currency equivalent thereof, are now required to register for Vat.

Failure to register will see applicable penalties invoked, Ncube said.

He said traders registered for Vat purposes and in possession of valid tax clearance certificates would be eligible to procure goods from manufacturers.

“The tax deferred will, however, be fixed at the foreign currency amount payable at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of payment.”

Business

Mthuli squeezes consumers, businesses – NewsDay