Split in Cabinet over transaction tax

HARARE - The recently announced tax regime has divided President Emmerson Mnangagwa’s Cabinet right through the middle with a section of it pushing hard to have the austerity measures reversed to ease the suffering among ordinary Zimbabweans, the Daily News can report.

Early last week, Finance minister Mthuli Ncube introduced a raft of measures aimed at breathing life into the country’s sickly economy — including a transaction tax pegged at two cents per dollar, which backfired spectacularly after being rejected by crisis-weary Zimbabweans.

To calm tempers, Ncube toned down the new measures on Friday, but that has done very little to calm markets that have hit turbulence.

Militant labour unions are now galvanising their members to go on strike to protest the punitive tax regime which they say must be scrapped as a matter of urgency.

Government sources told the Daily News yesterday that Mnangagwa’s Cabinet ministers were divided over Ncube’s tax agenda.

Ministers in social service ministries are particularly concerned that the new tax will make Mnangagwa’s administration unpopular with the generality of the population which has been hit hard by its consequences, intended and unintended.

Not even some of the ministers presiding over economic ministries are on the same page with Ncube over the new measures, with Energy minister Joram Gumbo appealing to the authorities last week to review the tax measures.

In an interview with the Daily News, Gumbo warned that the tax, which has already caused disquiet among petroleum firms, would lead to massive fuel price increases whose domino effect could potentially result in chaos in the economy.

Gumbo went as far as engaging Vice President Constantino Chiwenga, to whom he directly reports, to intervene.

In an interview with the Daily News yesterday, Small to Medium Enterprises minister Sithembiso Nyoni expressed her reservations saying while there could be advantages to be drawn from the austerity measures, including easing tax collection for government, there was need for a thorough look into the issue, including canvassing recommendations from stakeholders.

Nyoni spoke to the Daily News after Mnangagwa had for the first time openly spoken about the controversial tax, fully supporting his embattled Finance minister at a Professional Women Executives and Business Women’s Forum (PROWEB) business breakfast held at a Harare hotel yesterday.

Mnangagwa said in order to build the economy, government would have to take painful measures.

“Liberalisation of the economy has its own pains. This is one of the pains we are going to go through. I am happy that you have said I am decisive, for good or for bad, I am decisive.

“We will not continue to live in the past when the world is going ahead with ICT. Zimbabwe should not remain behind.

“The traditional methods of revenue collection are changing by the day, migrating from the past tradition to modern ICT patrons and as Zimbabwe, we must follow and adapt ourselves to modern trends in terms of collection of revenue,” said Mnangagwa.

The president said while he takes cognisance of the issues raised, it is necessary to also consider the challenges confronting the country’s economy such as its ballooning internal and external debt.

He said for the country to become a viable economy, painful measures were unavoidable.

“This is the beginning, we will not please the tax payer. We want to please the economy not the individual. We need productivity to get the foreign currency we need,” he said.

At the PROWEB forum, Nyoni said it was felt that stakeholders must critically look into the matter and make recommendations.

“I think ...Mnangagwa’s answer was pertinent that we need to go into really understanding who is exempted from it and who is affected by it, so we need to find out what is what and which is which and then we will be able to take our recommendations through the right channels to the ministry,” Nyoni said, adding it was prudent for stakeholders to do a cost and benefit analysis first before rushing to criticising the initiative.

“I also think we are just taking it blanketly, so without that analysis and I think as far as women are concerned, we were satisfied by the answer the president gave to the effect that we are going to sit down and analyse it.

“I think before we can criticise the taxes, it is important for us to study them carefully and analyse them and understand what they mean, particularly where exemptions are mentioned and I think a lot of people are criticising before they really go into what does it means or who, when and how. I think that’s what I would like to encourage.

“I think the advantages will be that there will now be an organised way of collecting taxes, because as the president now said that we have to be digital.”

Several shops have since removed price tags from their goods while hire purchase companies have revoked credit and lay-by terms as panic swept across business.

Some retailers have also started demanding payment in United States dollars.

Suppliers also put notices to supermarkets of new price increases as a result of both the two cents per dollar tax and widening fuel shortages.

Comments (10)

Mr President what does the advancement of ICT in the rest of the world got to do with your transaction-tax? A listening government with a people's president would carefully analyse a policy extensively consult all stakeholders before presenting it to the masses.

Sinyo - 9 October 2018

talk is cheapmoney buys beer

MOSES MUKWESHA TOOTS - 9 October 2018

When Cholera was ravaging the country, only the poor suffered, There was not even any of the big wigs that donated any significant funds towards helping the masses, instead they guarded their USDs jealously. Now the Govt goes further to tax that very poor person who will feel the pinch. It may not be openly said but it Is an open secret to all who holds millions of USDs in their safes at home. Those are the ones who are supposed to lead by example, use your monies for the betterment of you country, of your people and be patriotic for once. Why further tax the ordinary poor man who is already burdened by other taxes? Cry My beloved people(country), this can not be allowed.

Den - 9 October 2018

People do not understand what is good for them. Why do we not go into panic mode when supermarkets up their prices for no apparent reason. In this case prices had doubled in the last six months before the new finance minister was even appointed. Why did we not go on strike then? Reason is we hate everything government. The same government we expect to provide social services. If a tax is a percentage of amount transacted and anything less than $10 is exempted, then little day to day transaction (poor man transactions), are exempted. The more money you have the more you contribute towards this tax and if all of it were to find its way into social services then the rich would contribute a lot more towards the poor than the other way round. What we need to give time to and go on strike about is incidents of abuse of public funds like was beginning to happen at Council of Harare on the Econet donation for cholera and happens a lot in government and parastatals and even private sector. Give this a chance and not just parrot all we hear at the combi stop.

righttochoose - 9 October 2018

When will the rural base be taxed? Since we all need to move with the times, I say tax them too!

Sagitarr - 9 October 2018

Whoever came up with tax has no idea. Its punishing the poor majority for no reason and its also very steep. ICT developments are also in other countries and apart from Kenya who charge a similar tax at 0.05% I dont know of any other country with this kind of sinister tax. It looks like Mthuli is out of touch with reality and it will be better for him to go back to Davos now.

Inyika - 9 October 2018

Its very depressing that there are people who believe that prices just go up for no reason and that business derives some sort of sadistic delight and or satisfaction in hiking them up. The opposite is actually true since business thrives well in a stable and efficiently managed macro economic conditions. The sad but painful truth is that the present government has failed to provide the requisite leadership and guidance in this regard . This is irrespective of whether its ED or Mugabe at the helm. No amount of propaganda will fool anyone that the spiral in prices is not directly linked to government policies. Most prominent of these shortcomings is the liquidity crunch that we are going through at the moment. Its is deplorable if not laughable that anyone would therefore wish to deflect the responsibility for monetary and fiscal management to the opposition or anyone else outside government. The plain but galling fact is that ED and ZANU PF have the full and direct responsibility for the strife that Zimbabwe finds itself in today. it is logical to expect the people to register their dismay and opposition to this state of affairs by protesting or going on strike. Where on earth do you get such exponential increases in the cost of living on basic commodities and then expect people to fold their hands or even commiserate with an inept and corrupt government which is responsible for placing them in those dire circumstances in the first place. Its the epitome of lunacy to expect the populace to be silent about this state of affairs Lets get real here the situation is absolutely disastrous and it requires fundamental and far reaching changes to halt the precipitous slide. Any tinkering on the edges like ZANU PF is doing now amounts to fiddling with the fuse as the light hurtles towards the time bomb.

Jaikolu Maison - 10 October 2018

The President gave an ultimatum to those who looted the money to come forward. What happened to that? Can someone help me to understand what really happened. People loot money and they are known but left alone. What are we saying honestly. We lost everything in 2009 and that doest matter. Guys let get real please. Why dont we get back the money that was looted by people we know and rechannel it to the government as a starting point.

Desbo - 10 October 2018

The problem is trust, this government lacks legitimacy and trust of the citizens because 1) They rigged the election in the eyes of peace loving Zimbabweans and the people know that this government is elligitimate. 2) This government goes into overdrive lying to the people. When they introduced the bond note, they said it was an incentive to exporters whilst it was their ploy to siphon foreign currency from the people of Zimbabwe. In 2009, it is the same government that left us penniless and they think they can repeat that and get away with it the same way they did in 2009. Bitten once twice shy, we will protect ourselves and our small business and will not buy the cheap politics of this corrupt, election rigging Zanu Pf gvt.

ADVICE - 10 October 2018

LET THE TRUTH BE TOLD, IF YOU SEE A FATHER FIGURE STEALING IN A SUPERMARKET AND TOMMORROW HE COMES TO SAY MY SON STEALING IS BAD, DO YOU TRUST HIM. THATS ED FOR YOU. AFTER STEALING THE ELECTION, HE WANTS TO PRETEND AS IF HE CARES, WE WILL NEVER TRUST A THIEF AND THE ECONOMY TOO CANT TRUST THEIVES.

Baba Mary - 10 October 2018

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