New tax will burden formal workers: CZI
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