By Sharon Mupfure
Finance Minister Mthuli Ncube, since his appointment two years ago, has never been a friend of the poor. In his latest budget statement, he makes it clear that nothing has changed.
One of his first decisions as minister was to introduce a truly repressive tax of 2% on every electronic transaction. It burnt the pockets of the poor the hardest.
Over the next two years, Ncube convinced the government to let go of safety nets, which those who are anti-poor like him like to call “distortions”. All this in order to clear deficits and make his accounts look good.
In his 2021 budget, Ncube has taken the hatchet to millions of Zimbabweans struggling to make ends meet in the informal economy. This is the majority of Zimbabweans. He has proposed a tax of the equivalent of US$30 per month for the mother running a small flea market. Sisi Sandra the hairdresser must pay Z$2500 every month to the government, among other taxes.
Yes, most traders in the formal sector are indeed women, the same people who already bore the brunt of Mthuli’s reckless hurry to just balance his books and boast about fiscal discipline.
This new tax regime must be resisted. Below are my reasons;
Firstly, taxing the informal market at US$30 is excessive and cruel. This is a sector that is still to recover from the impact of COVID-19. The virus only made worse what was already a tough situation for many in this sector, to put it mildly.
The government’s own recent research, a collaboration between Zimstat and the World Bank, told us that 90% of Zimbabwean households operating small businesses lost significant income due to the lockdown.
So, just as they are starting to recover, their own government hits them with a big axe. Are we supported to just say this is OK, in the name of “everyone must pay tax”?
Why not give them time to recover, or at least consider an incremental tax? Ncube won’t consider that, because his concern is the books, not the people.
Systems not in place
Secondly, there is serious doubt that systems are in place to administer this tax. With millions in informal trade, can ZIMRA net all of them where it is failing with far fewer registered companies?
What we are likely to see is haphazard chasing of traders, and we all know where this leads to; abuse and corruption.
Ncube will soon find out that the cost of trying to raise taxes from small traders is far higher than any tax he is likely to collect. Many countries that have tried this have discovered this truth. According to an ActionAid report in 2018, which looked at similar attempts to tax informal sector, “the sheer number of fees and lack of clarity about who collects them creates frustration and opportunities for corruption”.
No impact assessment
Thirdly, the reasonable thing would have been to conduct an extensive impact assessment before proposing this tax.
The Minister needed to find out the state of those he is trying to tax. Do they have the capacity to pay US$30? What do they earn? How would this tax affect their income?
This is what the Minister must do, in my view; he should first ask himself if this tax on the informal market will improve the economy, or damage it more. The answer is clear.
If he decides, against all reason, to go ahead with this idea in its current form, he needs to communicate to improve transparency and ensure his notorious ZIMRA officials don’t use this as another opportunity to harass and demand bribes.
Yes, everybody should pay tax. Nobody has a problem paying tax if they see it working for them. Why people resent tax is that the poor are taxed and then watch leaders buy big cars. Meanwhile, we are taxing people who are working in markets with no proper sheds or running water.
Poor people have had no safety nets under Ncube’s policies. This new regime of taxes is insensitive to the plight of the poor.
Our Members of Parliament, across the divide, must do their job and strongly resist Ncube’s cruel and draconian tax measures until they are implemented in a way that does not make the poor even poorer than they are.