Source: Forex crisis causes mayhem – DailyNews Live
Farayi Machamire and Jeffrey Muvundusi 12 October 2018
HARARE – Contraditions in the implementation of the controversial two
percent tax have further fuelled an already volatile economic crisis, with
companies responding by either closing shop or increasing commodity
prices.
The inconsistencies follow austerity measures introduced by Finance
minister Mthuli Ncube on October 15.
Ncube shook the market when he reviewed the Intermediated Money Transfer
Tax from five cents per transaction to two cents per dollar, effective
October 15.
He later toned down the tax a few days later following outrage from
members of the public and business.
On Tuesday, Vice President Kembo Mohadi turned the tables, insisting
government was yet to implement the two percent tax.
Ncube and President Emmerson Mnangagwa have since issued further
statements, separately, to calm the situation.
But the varying statements have inadvertently confused the market with
prices shooting through the roof; shortages emerging and parallel market
rates hitting record territories.
To avoid diminution of value, retailers are now pegging their prizes in
United States dollars as the Real Time Gross Settlement balances and bond
notes devalue daily on the parallel market.
Political analyst Maxwell Saungweme told the Daily News yesterday that it
was unfortunate that politics continued to supersede economic
developments.
He said policy inconsistencies were typical of Zanu PF’s modus operandi
that fuels speculation and inspire no confidence.
“This is not new. But in this case, it exacerbates a bad economic
situation and betrays the disconnect between the political wing of Cabinet
run from Zanu PF headquarters and the technocratic wing that really think
going by the book will help. But as usual, little progress will be
realised as political foolhardiness leads economic and policy logic in
Zanu PF,” he said.
Analyst Pedzisai Ruhanya said Ncube was coming face to face with being a
technocrat in a Zanu PF-led government.
He said: “Finance minister Mthuli Ncube and some of the technocrats who
joined Zanu PF will realise shortly that corruption in Zanu PF is official
government policy. The contradictions between the government and Zanu PF
politburo on the fiscal and monetary measures are testimony!”
Legal watchdog, Veritas, said if financial institutions, banks and
telecommunications companies had started implementing Ncube’s directive
they would have been committing an illegality as the tax had not yet been
gazetted.
“And they should bear in mind that if and when the minister makes
appropriate regulations, any attempt to backdate the new rate of tax to
1st October is likely to face a stiff constitutional challenge.
Unlike the former Constitution, the present Constitution specifically
commands `respect for vested rights’ [section 3(2)(k)]. [Note: `vested
rights’ are those that already exist which cannot be impaired or taken
away (as through retroactive legislation),” Veritas said.
Currency expert Steve Hanke who is a professor of Applied Economics and
co-director of the Institute for Applied Economics, Global Health, and the
Study of Business Enterprise at the Johns Hopkins University, said it is
impossible to tax an economy into prosperity.
“Zimbabwe’s new two percent tax on all money transfers reveals more than
the tax. It’s a sign of a desperate government acting without thinking.
This tax will only cause more private sector panic and further loss of
confidence. The last thing Zim needs is more government involvement in the
economy,” Hanke wrote on his twitter account.
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