Finance and Economic Development Minister, Mthuli Ncube last Thursday presented a high-sounding Mid-Term Budget Review statement which failed to resolve the headwinds facing the economy, captains of industry and analysts have said.
Many expected Ncube to cut the Intermediated Money Transfer tax (IMTT), diamond royalties and increase the tax-free threshold to ZWL$150 000.
Instead, Ncube increased the platinum royalties to raise money for the former commercial white farmers’ compensation.
This left a trail of anger on captains of industry.
The Confederation of Zimbabwe Industries president Kurai Matsheza told Business Times that Ncube’s budget lacked depth.
“To us, it’s just a mid-term statement which comes with a supplementary budget. It was not targeted to address broader issues and in this case it didn’t address anything.
“Ncube may have only touched on the tax free threshold which was increased to ZWL$50 000 and falls short given where the family basket is [over ZWL$150 000],” Matsheza said.
The Zimbabwe National Chamber of Commerce president Mike Kamungeremu said Ncube ignored the chamber’s submissions.
“Workers are key to us therefore we were urging the minister to address the tax free threshold and he did that though we thought he would have done more by matching it with a family basket at around ZWL$150 000 therefore he did not address it enough.
“We also raised the issue of VAT in US$ where we are saying input costs that we are incurring in local currency at present, the tax authority is not allowing to deduct that from output tax that we get in forex at selling and Ncube’s statement falls short of that,” Kamungeremu said.
He added: “You can’t mix the two. We were just saying that if the government allows the ZWL$ input taxes then we net it off against the output tax.
“The Minister also responded by saying you can also pay your duties in forex so that you are then able to deduct your output tax. We feel that does not solve the problem that we are talking about.
“The Minister simply does not want that.”
He said that the IMMT was maintained means the statement did not do much to defend local currency and it only confirms the government has a huge appetite on forex than ZWL$ and that is why businesses are dollarising.
Gweru-based economic analyst Trust Chikohora said the doubling of the tax free threshold to improve disposable income falls far short of inflation at 257%.
“Improvement of disposable incomes will be inadequate. If you want to improve the levels of disposable incomes you need to increase the tax-free threshold to a level which at least meets inflation. This is far short of the level of inflation, so it is inadequate,” Chikohora said.
Growth in Gross Domestic Product was cut to 4.6% from 5.5% due to global pressures and also the internal inflationary pressure.
Ncube presented a ZWL$929bn supplementary budget last Thursday and experts believe this will further push inflation up.
Economist Gift Mugano said with ZWL$929bn supplementary budget distributed to government service providers one can only expect the exchange rate to run away until the ZWL$ goes into extinction.
He said the adjustment in the tax free threshold was too low.
“…One would have expected that Ncube could have raised the tax free threshold to around ZWL$150,000 so as to move in line with the consumer basket for a family of five which has just hit ZWL$140,000 for the month of July 2022,” Mugano said.
The Chamber of Mines of Zimbabwe wanted royalty for diamonds which is at 10% to be reduced to 7% to ensure viability but Ncube did not address that.