Prof Mthuli Ncube’s ‘painful’ rev­enue mas­ter­stroke

Chronicle (Zimbabwe) - - Front Page -

at five per­cent per trans­ac­tion with ef­fect from 1 Jan­uary 2003 through the Fi­nance Act 15 of 2002.

“Due to the in­crease in in­for­mal­i­sa­tion of the econ­omy and huge in­crease in elec­tronic and mo­bile phone based fi­nan­cial trans­ac­tions and RTGS trans­ac­tions there is need to ex­pand the tax col­lec­tion base and en­sure that the tax col­lec­tion points are aligned with elec­tronic mo­bile pay­ment trans­ac­tions and RTGS sys­tem,” said Prof Ncube.

“The in­for­ma­tion we have so far is that in 2018 1.7 bil­lion trans­ac­tions went through as com­pared to 50 mil­lion four years ago. I, hereby, re­view the In­ter­me­di­ated Money Trans­fer Tax from five cents per trans­ac­tion to two cents per dol­lar trans­acted, ef­fec­tive 1 Oc­to­ber 2018.” Trea­sury has since di­rected fi­nan­cial in­sti­tu­tions, banks and Zimra, work­ing to­gether with telecom­mu­ni­ca­tion com­pa­nies to ex­tend the col­lec­tion to all elec­tronic fi­nan­cial trans­ac­tions.

Cer­tainly this is not an amus­ing pro­nounce­ment to con­sumers and busi­nesses alike, as it hits hard on their pock­ets when transacting elec­tron­i­cally. The con­cern is in­deed jus­ti­fied given bit­ing cash short­ages that have seen mo­bile money plat­forms or swipe as the only op­tions.

There is need, how­ever, to look at the big­ger pic­ture, that of cit­i­zen con­tri­bu­tion to na­tional de­vel­op­ment, which ev­ery Zim­bab­wean needs to se­ri­ously in­ter­ro­gate. The na­tion des­per­ately wants im­proved ser­vice de­liv­ery. The same cit­i­zens who cry foul over tax bur­den should know that ser­vice de­liv­ery starts with cit­i­zens pay­ing tax.

It’s an in­vest­ment that one will meet when he or she goes to a hospi­tal or drives along a pub­lic road, for ex­am­ple. Pub­lic hos­pi­tals, new schools, clin­ics, roads and oth­ers are de­vel­oped us­ing pub­lic funds from tax. Such sim­ple ex­am­ples need to be un­der­stood by all. It is a fact that we have a gen­er­a­tion of en­trepreneurs that have never paid a sin­gle cent of tax in their lives.

The same peo­ple that opt to demon­strate de­mand­ing ser­vice de­liv­ery, the same gen­er­a­tion that is shocked when in­fra­struc­ture is de­cay­ing, should un­der­stand, painful as it is, the need to start pay­ing tax. More pub­lic ed­u­ca­tion is re­quired se­ri­ously on this. We all need to ap­pre­ci­ate that gov­ern­ments all over the world have one means of rais­ing money to pro­vide ser­vices.

That means is called Tax! With 90 per­cent of transacting with in­for­mal busi­ness out­side the tax sys­tems, this means every­one is not pay­ing tax and that is not good for de­vel­op­ment. Tax is a re­al­ity.

This, how­ever, does not down­play the need for ra­tio­nal­ity and tak­ing into ac­count the plight of cit­i­zens who pay tax. The Gov­ern­ment would have to be more trans­par­ent and in­crease ac­count­abil­ity in how the tax pay­ers’ money is utilised. Aus­ter­ity mea­sures on Gov­ern­ment ex­pen­di­ture have to be taken and swiftly im­ple­mented.

Prof Ncube has al­ready made a pro­nounce­ment to this ef­fect and shown de­sire to slash pub­lic ex­pen­di­ture to tame bud­get deficit. The pub­lic has the right to de­mand ad­e­quate ser­vice de­liv­ery too as well as im­proved fi­nanc­ing of cap­i­tal projects and bet­ter stan­dards of liv­ing. This is where most Africa Gov­ern­ments have failed the test and Zim­babwe will have to do bet­ter go­ing for­ward.

Ac­cord­ing to the Busi­ness In­sider, tax rates vary in each coun­try, from over 50 per­cent to zero per­cent for the aver­age wage earner in the coun­try. In de­vel­oped coun­tries, the tax rates are much higher and that is re­flected in the level of their so­cial ser­vices and ba­sic in­fra­struc­ture so­phis­ti­ca­tion.

The pub­li­ca­tion notes that Spain, France, and Ger­many, for in­stance, all have the same 30 per­cent tax rate for the aver­age cit­i­zen, but Ger­many has the high­est aver­age salary. Sim­i­larly, Switzer­land and Den­mark have the high­est pre-tax salaries.

The African Tax Ad­min­is­tra­tion Forum (ATAF)’s 2018 edi­tion of the African Tax Out­look, also ac­knowl­edges the prob­lem of tax com­pli­ance and the need for re­forms and poli­cies to broaden the tax base, nar­row tax gaps, sim­plify and im­prove fair­ness in tax sys­tems, en­hance over­all vol­un­tary com­pli­ance, and keep pol­icy mak­ers in­formed on tax mat­ters. This stresses the need for a com­pre­hen­sive re­form on tax ad­min­is­tra­tion at home so as to gen­er­ate ad­e­quate re­sources to fi­nance de­vel­op­ment.

Prof Mthuli Ncube

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