‘New tax measures bold, helpful’
SOME new tax measures proposed in the 2024 National Budget on Thursday have hogged the limelight in the past few days and will likely continue to do so over the next few weeks.
But, with Zimbabwe still bogged down by illegal Western-imposed sanctions, which have cut off international lines of credit, fiscal authorities have no option but to dig deep to finance ongoing critical projects.
Because of the situation the country finds itself in, Zimbabweans have to inexorably bear the cost of the nation’s development.
The financial plan for the upcoming year is a vital one, especially as the National Development Strategy 1 (2021-2025) comes to an end.
The theme of the 2024 Budget — “Consolidating Economic Transformation” — speaks to the need to consolidate the gains that have been achieved so far.
Boosting revenues is key to achieving these targets.
And, in ways that are not always clear to everyone, taxation can be used to actualise the country’s developmental aspirations.
“Emotions and sensationalism aside, in terms of putting Zimbabwe on a solid growth trajectory, the tax measures proposed by Professor Ncube are game changers in terms of developing the country,” said economic analyst Mr Malven Chidzonga.
‘Bold moves, but helpful in the long run’
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube proposed to reduce the value-added tax (VAT) registration threshold from US$40 000 to US$25 000 (or local currency equivalent) with effect from January 1, 2024.
This is designed to tap into the growing
informal sector that has been a significant component of the local economy for years.
Treasury also proposed to end the suspension of duty on basic commodities with effect from January 31, 2024.
While this move will help boost the country’s coffers, it will also help curb the influx of imported goods at the expense of local producers.
A levy of US$0,02 per gramme of sugar contained in beverages — envisaged to begin on January 1, 2024 — was further proposed.
Funds pooled from the levy are expected to contribute towards the fight against non-communicable diseases.
In recent years, cancer has emerged as one of Zimbabwe’s leading killer diseases.
According to the Cancer Association of Zimbabwe, the disease kills over 1 500 people each year.
In other revenue-enhancing measures, Prof Ncube said Central Vehicle Registry fees will go up, effective January 1, 2024.
In addition, the 2024 Budget has proposed to increase passport fees from US$120 to $200 from January next year, with the funds being ring-fenced towards development of road infrastructure.
And, in an interesting development, the minister proposed to introduce a wealth tax, which will be levied at a rate of 1 percent of market values of residential properties with a minimum value of US$100 000.
In recent years, if not decades, Zimbabweans have been debating how property prices are overinflated compared to countries in the region and internationally.
The wealth tax may help ensure that properties are properly and effectively valuated.
“Resources derived from the levy will be ring-fenced towards urban infrastructure development; in particular, roads, water, sewer and community health centres,” said Prof Ncube.
“Principal private residential properties owned by elderly persons above 70 years will, however, be exempt from the tax.”
Economic analyst Mr Persistence Gwanyanya — who is also a member of the Reserve Bank of Zimbabwe’s Monetary Policy Committee — said the measures were necessary to meet the country’s fiscal requirements next year, which are likely to be relatively higher because of the impact the El Niño weather phenomenon will have on the 2023/2024 summer cropping season.
“The budget envelope of around $58,2 trillion, or thereabout, is a significant increase from last year, which is reflective of the volatility we are in,” he said.
“What is equally important is the prioritisation of growth and stability.”
To improve workers’ disposable incomes, the 2024 Budget widened the tax-free threshold to $750 000 per month (or $9 000 000 per annum) starting January 1, 2024, while the bonus tax-free threshold increased from $500 000 to $7,5 million with effect from November 1, 2023.
It was also important that the Government boosts its revenue measures to keep the budget deficit in check.
Prof Ncube expects a budget deficit of $4,3 trillion, which is 1,5 percent of Gross Domestic Product (GDP), next year.
This is in line with the National Development Strategy 1 target of below 3 percent.
A sustainable budget deficit — less than 3 percent of GDP — is vital to keep depreciation of the local currency and inflation in check.
To ensure that “no one and no place is left behind”, the 2024 Budget allocated $2,7 trillion, in line with the set target of 5 percent of projected revenue, to provinces.