On the 1st of October 2018 Finance minister Mthuli Ncube announced the introduction of a two percent tax that would apply on mobile and card payments and bank transfers above $10 with a few exceptions eg transfer of government funds and foreign payments. The tax, according to the minister was part of fiscal measures aimed at correcting imbalances in the country’s economy. It was meant to raise funds that would be used for economic and infrastructure development.
This announcement did not go down well with the general public as they felt that they were being made to fund the cleaning up of the mess that had been created by the same government. The other challenge was the fact that already the citizens of Zimbabwe were already being taxed heavily and so this further tax was not going to aid their situation at all. A number of individuals, economic expects, unions, action groups and even honorable ministers in the country petitioned the government to review this tax as it would cause more harm than good.
An economist, Mr John Robertson said the tax introduction would result in more private sector panic than instill confidence. He said it would reduce the money spent by each household and in turn government receipts. On the ground, research has shown that this tax has indeed worsened the situation for ordinary citizens as it has led to price increases as business owners have gone on to pass this tax burden to their customers. Given the current cash shortages that have crippled the country for over a year now, the introduction of this two percent tax further eats into the not so fat wallet of the ordinary Zimbabwean at a time when over 90% of all transactions are being done either via mobile or card platforms. Indeed it was true when the finance minister said ‘albeit the painful process’ austerity measures like these are necessary and that it was indeed going to be a ‘painful process’ for Zimbabweans. We feel the pain now.
Not only is this tax affecting consumers but businesses have suffered as a reduction in the disposable income of consumers directly affects the purchasing power of consumers hence a reduction in their monthly spending. This will affect company profits and soon retrenchment of workers would be the order of the day as companies try to cut down operating costs. At a time when the country is trying to boost economic growth, the last thing needed is the introduction of measures that work against the common national goal which is economic recovery.
However some economist have said such a stabilization programme required discipline and was bound to receive criticism from a variety of politicians and individuals alike but a national effort is required to ensure that the country goes forward. The national ship is already sinking and all Mthuli Ncube is trying to do in all honesty is involve every individual in the rebuilding of our economy for a better tomorrow. One thing that we can all agree on is that this tax needed to be reviewed so as to assess the actual impact it was having on the ground. The announcement by President Emmerson Mnangagwa could not have come at a better time.
The government is set to review the two percent tax on electronic money transfers so as to make it user friendly to both business owners and the general public. It seems the cries of ordinary citizens for once have been heard and their hope would be that government would soon announce new measures to review the tax and ease the ‘pain’. The Head of State and Government said a local business advisory body made up of representatives seconded from industry would be set up to improve the communication lines between the government and the general public.
The nation eagerly awaits the outcome of this review hoping that it will be positive and promote economic growth.
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