Bleak future as Chinamasa introduces new taxes

via Bleak future as Chinamasa introduces new taxes 12 September 2014 by Veneranda Langa

ZIMBABWEANS should brace for a bleak future after Finance minister Patrick Chinamasa yesterday introduced a raft of new tax measures to bankroll the cash-starved government.

Some of the measures include an upward review of fuel tax, employee benefits, meat, detergents and introduced excise duty on airtime.

Presenting the Mid-Term Fiscal Policy Review Statement in the National Assembly yesterday, Chinamasa said due to the underperformance of mining and manufacturing sectors, gross domestic product growth had been revised downwards from $6,1% to 3,1%; adding agriculture was now the main driver of the economy due to good rains.

“Excise duty on diesel and petrol is currently pegged at 25 cents and 30 cents per litre. In order to raise additional revenue to finance inescapable expenditure, I propose to increase excise duty on diesel and petrol from 25 cents and 30 cents per litre to 30 cents and 35 cents per litre respectively with effect from September 15, 2014,” Chinamasa said.

“Government faces a challenge to raise additional revenue to finance non-discretionary expenditure and I therefore propose to levy excise duty of 5% on airtime for voice and data with effect from September 15, 2014,” he said.

He said cancellation of duty on handsets last year resulted in significant mobile penetration to over 100%, but he now proposed to begin levying customs duty on mobile handsets at a rate of 25% with effect from October 1 2014.

He said there will be upward review of duty on edible meat offals and dairy produce, vegetables and miscellaneous edible preparations, beverages, mineral products, perfumes, cosmetics, soap and furniture with effect from October 1 2014.

He said he was also going to review rentals for housing units under the National Housing and National Guarantee Funds which were last reviewed last year and ranged from $20 to $500 per month, resulting in inadequate revenue collected from rentals.

“I therefore propose to review the rentals to cost recovery levels in order to raise adequate funds to refurbish and also maintain the housing units with effect from October I 2014.”

To support the productive sector, Chinamasa proposed exemption from export tax from the sale of raw hides and skins for the period January to December, as well as exemption from export tax of crocodile skins.

“Imports of motor vehicles from January to June accounted for about 10% of the import Bill to the detriment of local motor vehicle assembly plants. In line with the ZimAsset strategic cluster to enhance value addition and beneficiation, I propose to increase customs duty on single cab of a payload more than 800kgs from 20% to 40%, buses of carrying capacity of 26 passengers and above from 0% to 40%, double cab trucks from 40% to 60%, and passenger motor vehicles of engine capacity below 1500cc from 25% to 40%.”

Chinamasa said government departments and parastatals will now have to purchase vehicles from local assembly plants.

“To enhance competitiveness of the clothing industry, and control importation of finished goods under the guise of raw materials, he proposed to levy customs duty on blankets imported as raw materials.

Taxes on gold produced by primary producers will, however, be reduced downwards from 7% to 5%, as well as presumptive tax on small scale gold miners which will be reduced from the current 2% to 0%.

On charity organisations, he said donated goods ended up being sold; adding locally available stuff such as mealie meal was also imported by these organisations.

“I therefore propose to exclude selected foodstuffs imported by welfare organisations from rebate of duty in order to encourage growth of the local industry,” Chinamasa said.

He said Zimbabwe will continue to retain the multi-currency regime, adding there will be public enterprise reforms to establish remuneration levels of management, establish the procurement framework, and legal reforms to soften up the Indigenisation and tax legislation.

On demonitisation, Chinamasa said the amount to be spent on this exercise will be guided by balances at banks, taking into account even those bank balances rendered nil as a result of hyper inflation and Zimbabwean dollar balances outside the banking system.

He said the civil service wage bill continued to drain the fiscus, adding he was working on modalities to service external debt.