Govt, SDAs to pay vehicle duty

via Govt, SDAs to pay vehicle duty – DailyNews Live • 7 December 2015

HARARE – Zimbabwe’s cash-strapped government has come up with various measures, such as forcing government departments and school development associations to pay duty on imported vehicles, to boost its depleting coffers.

Finance minister Patrick Chinamasa said the latest development, which will come into effect on January 1, 2016, is aimed at resuscitating the local car manufacturing industry.

“Notwithstanding the directive issued by the Office of the President and Cabinet through circular Number 16 of 2011, compelling purchase of motor vehicles from local assembly plants, government departments and parastatals, however, continue to import motor vehicles,” he said in the 2016 National Budget.

“I, therefore, propose to remove selected motor vehicles and buses imported by government and school development associations from the duty free certificate facility, in order to facilitate implementation of the Cabinet circular and also empower the local motor industry,” Chinamasa added.

Economic analysts say Zimbabwe’s local motor vehicle industry has potential to manufacture light commercial vehicles and buses, but this has been impeded by challenges that include limited access to working capital, antiquated machinery and unfair competition from subsidised imports.

Challenges in the local motor industry have resulted in the country spending over $5,3 billion on car imports since 2009, according to official statistics.

However, there has been a decline of vehicle imports in the last three years due to tightening liquidity conditions and massive company closures that have seen millions of people migrating to neighbouring countries in search of greener pastures.

Analysts say the move by Chinamasa will result in government saving millions of dollars to meet its bloated civil service wage bill.

Zimbabwe’s burgeoning wage bill, which gobbles up nearly three quarters of the country’s $4 billion annual budget, is one of its biggest fiscal challenges and government has struggled to come up with a clear policy position to tackle it.

Early this year government announced that it had suspended bonus payments to civil servants until 2017 in a bid to reduce its massive wage-bill which gobbles up about 80 percent of its income but President Robert Mugabe rescinded the move, saying Cabinet had not approved the suspension.

Last year, the bonus bill stood at $172,6 million with the major chunk of  it being paid in the first quarter of 2015.

The government, battling with a $10 billion debt has to reduce its wage bill to meet targets set under the International Monetary Fund’s Staff Monitored Programme – an informal agreement between a government and IMF staff to monitor the implementation of a particular country’s economic reforms, whose key benchmarks include reducing the government’s wage bill.