New tax will bur­den for­mal work­ers: CZI

Chronicle (Zimbabwe) - - Front Page - Busi­ness Re­porter

THE Con­fed­er­a­tion of Zim­babwe In­dus­tries (CZI) Mata­bele­land Cham­ber has said the new 2c tax for every dol­lar on elec­tronic trans­ac­tions will add more bur­den to the for­mally em­ployed and crip­ple value chain ef­fi­cien­cies in the pro­duc­tive sec­tor.

Speak­ing on the on-go­ing de­bate about the new tax which was im­posed by Treasury in last week’s fis­cal sta­bil­i­sa­tion mea­sures, pres­i­dent of CZI Mata­bele­land Cham­ber, Mr Joseph Gunda, said:

“While the ob­jec­tive of in­tro­duc­ing the two per­cent charge on elec­tronic trans­ac­tions is meant to gen­er­ate rev­enue, it will how­ever, hurt the or­di­nary per­son es­pe­cially those in full time em­ploy­ment as they are al­ready taxed on PAYE, VAT, sales tax when buy­ing goods from shops as well as man­power de­vel­op­ment levy etc”.

Although Zim­bab­weans ap­pre­ci­ate the ad­van­tage of widen­ing the tax net by tax­ing the in­for­mal sec­tor, Mr Gunda said Treasury’s stance in this in­stance “will fall hard on those for­mally em­ployed”.

He feared the de­ci­sion, com­ing es­pe­cially af­ter a de­lib­er­ate per­sua­sion by Government in en­cour­ag­ing elec­tronic trans­ac­tions, would re­verse the gains achieved so far.

“The pol­icy on cur­rency ef­fec­tively opens the av­enue for a two-tier pric­ing model that will bring its own chal­lenges as it is ad­mis­si­ble through mar­ket forces, that the bond note’s strength to com­pete with the US dol­lar at par is not sup­ported,” said Mr Gunda.

He also said com­pa­nies’ vi­a­bil­ity will be neg­a­tively af­fected by the two per­cent tax as many busi­nesses do elec­tronic trans­ac­tions of “ap­prox­i­mately two times their value of turnover” through loan re­pay­ments, trans­fers be­tween bank ac­counts and nor­mal pay­ments.

“Hence the two per­cent will ef­fec­tively rep­re­sent a tax of ap­prox­i­mately four per­cent of turnover. Mar­gins in the re­tail sec­tor are so low, hence they will lose two per­cent of their rev­enue when they make pay­ments,” said Mr Gunda.

“Fur­ther­more, the two per­cent tax will also com­pound through the value chains and where for ex­am­ple, there are five steps in a value chain, the tax can com­pound to 10 per­cent and this will prej­u­dice the com­pet­i­tive­ness of our prod­ucts and coun­try.”

Fol­low­ing wide­spread con­cerns over the new tax, Fi­nance and Eco­nomic De­vel­op­ment Min­is­ter, Pro­fes­sor Mthuli Ncube, on Fri­day re­viewed the ini­tial propo­si­tion by ex­empt­ing all trans­ac­tions be­low $10 while those above $500 000 will be levied a flat $10 000.

Prof Mthuli Ncube

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