Tax spikes pile on misery for suffering employees

via Tax spikes pile on misery for suffering employees – The Zimbabwe Independent September 26, 2014

THE recent tax hikes by the Zanu PF government, which is desperate to boost its dwindling revenues, will leave most employees worse off as their paltry salaries are not enough to look after their immediate families and hard-pressed relatives in an economy with unemployment rate estimated at over 80%.

In the absence of social security nets, the employee is now left with no option but to cater for relatives that include the aged, disabled and orphaned.

To add to the employee’s woes, Finance minister Patrick Chinamasa introduced a raft of new taxes which resulted in the increase of fuel tax, employee benefits, detergents, meat, and also introduced excise duty on airtime and mobile phones.

Presenting the mid-term fiscal policy review statement in the National Assembly, Chinamasa said: “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.”

“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,” Chinamasa said.

Zimbabwe has no social protection nets such as unemployment benefits, old age benefit and disability benefits which exist only on paper as the broke government does not have the funds to meet such obligations.

This is despite the fact employees pay a portion of their salaries to the National Social Security Authority (Nssa).

As its mission, Nssa was constituted and established in terms of the Nssa Act of 1989, and aims at “providing social security to protect an individual in life situations or conditions in which his/her livelihood and well-being may be threatened, such as those engendered by sickness, workplace injuries, unemployment, invalidity, old age, retirement and death”.

However, Nssa has always been at pains to explain the insignificant pensions it pays to pensioners and its failure to carry out its mandate as a social security service provider.

In an interview on Tuesday, Nssa general manager James Matiza said his organisation’s schemes are employment-based and the funds can only be disbursed when one reaches 60 years old.
“Our services are for those who once worked and contributed to this fund,” Matiza said.

“We pay a minimum of US$60 and a maximum of US$1 900 to the pensioners, depending on how much they were being paid when they were still employed,” Matiza said adding: “Those who have never worked and have reached a certain age where they are not able to look after themselves can approach the social welfare department for assistance.”

Matiza also said Nssa schemes were based on the principle of social solidarity and pooling of resources and risks involving drawing of savings from periods of employment, earnings and good health to provide for periods of unemployment, old age, invalidity and death.

About 20% of Zimbabwe’s population is economically active and pays taxes to government.

It is this same workforce that is mostly underpaid but overtaxed and should, at the same time, take care of the less-privileged in extended families.

Despite celebrating the growth of the informal sector which mirrors the country’s deindustrialisation, government has no mechanisms for collecting taxes from this sector.

Contrary to the Zimbabwean situation, regional neighbours like South Africa pay a number of grants which in South Africa’s case include to foster child grant, child support grant, care dependence grant, old age grant and disability grants to mention a few, as it seeks to provide social security to its citizens who cannot afford to look after themselves.

The South African government pays an old age grant of R1 350 (US$135) to any person “60 years or older, a citizen or permanent resident of South Africa and must be living in South Africa at the time of applying for the grant”.

Zimbabwe Youth Forum director, Wellington Zindove, said government is killing an already overburdened employee through over-taxation despite the fact that employee has other responsibilities which should be taken care of by government.

“The taxes leave citizens without the opportunity to save and develop themselves and the economy,” Zindove said.

“Our natural resources, if responsibly managed will enable the country to raise enough money to offer society security across age groups; the elderly, the unemployed youth from colleges and the differently-abled in our society. It is a shame that this matter is not being debated by the public and political parties do not seem interested in pushing such matters.”

Zindove also said when one adds up all forms of taxation in the southern African country, the average Zimbabwean will soon end up paying about half of their income in some form of taxes to finance government expenditure.

Local economist Godfrey Kanyenze said government has always left the task of providing social security to the donor community.

“There has always been a parallel process with government giving the task to the donor community such as the United Nations Children’s Fund which has been paying school fees through the Basic Education Assistance Module (Beam) and other responsibilities,” Kanyenze said.

“As government, it should lead in providing social security nets to its citizens and make sure the over-taxed employee’s burden is catered for, especially in the upkeep of the vulnerable people in our communities,” he said.

In a move that typifies government’s failure to meet its social obligations, nearly 40 0000 primary school children were forced to drop out of school last month after government failed to pay its part of Beam, despite the UK government playing its part by availing US$10 million to assist the vulnerable pupils.