Zimbabweans face higher taxes

HARARE - Zimbabweans could pay higher taxes if Parliament adopts the proposed Reserve Bank of Zimbabwe (RBZ) Debt Assumption Bill, analysts say.

This comes as the government recently hiked taxes on fuel, airtime and basic foodstuffs.

Under the bill, government — through the Finance ministry — will assume the Central Bank’s debt, amounting to about $1,1 billion.

Analysts said government will have no option, but to hike taxes in order raise funds to repay the RBZ debt.

“The current situation is that RBZ has no capacity to service bonds and although government has offered to assume the Central Bank debt, they are too broke to service these debts,” said Cade Zvavanjanja, an analyst with Greeyps Risk, Efficiency and Development Consultants.

“The only option of getting this money, apart from a free bailout package, would be to levy more taxes,” he said.

He, however, warned that “another tax hike would be

impractical on government’s part as the country’s tax-gross domestic product (GDP) ratio is already too high according to the International Monetary Fund (IMF) stipulations”.

“According to the IMF, a country’s taxes must match its per capita.

Currently, the Zimbabwe tax to GDP ratio stands at about 49,3 percent and this is already too high,” Zvavanjanja said.

“The tax effort average must not be above 1,0 percent for a country with our level of per capita GDP while the Zimbabwean tax effort average is already above 1,5 percent,” he said, adding that “this is simply too high thus making it nearly impossible to introduce more taxes, but these people are unpredictable”.

Zimbabwe Coalition on Debt and Development (Zimcodd), a social justice pressure group, also said that the only option the hard- pressed government has to pay off the debt would be to “tax poor Zimbabweans to death”.

“Eventually, they will bleed innocent Zimbabweans to death through taxes to service these loans,” said Israel Mabhoo, a Zimcodd board member.

Government has offered to issue Treasury Bills (TBs) to service the debt accumulated during the country’s hyperinflationary phase between 2006 and 2008.

The TBs will mature after three to five years. The Bill seeks to provide settlement of certain liabilities incurred by the bank.

Among its dues, the RBZ owes an institutional debt of $110 million, $80,2 million in Central Bank credit lines, a sovereign debt of $452,6 million, and local debt of about $440 million. In terms of the Bill, the State will assume the debts which were incurred by the RBZ before December 31, 2008.

Also, the Finance ministry’s Debt Management Office, set up in 2010, would validate and reconcile the Central Bank’s debts.

In his recent mid-term fiscal policy review, Finance minister Patrick Chinamasa hiked excise duty on petrol and diesel from 25 cents and 30 cents per litre to 30 cents and 35 cents per litre respectively with effect from September 15, 2014. He imposed a 15 percent tax on airtime for voice calls and data services.

The Treasury chief also ordered tax on selected foodstuffs, offals, beverages, dairy products, blankets, canned foods, soap and cosmetics imports to be hiked with effect from October 1, 2014.

He also increased customs duty on light commercial vehicles, buses, double cabs and passenger motor vehicles from 40 percent to 60 percent with effect from November 1, 2014.The tax hikes are expected to create funds to bankroll government workers’ salaries and other pressing recurrent expenditures.

 

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