THE Confederation of Zimbabwe Industries (CZI), the country’s main business representative body, has come out in support of government’s 2% tax on electronic payments after initially opposing the unpopular revenue measure.
The tax, announced by Finance Minister Mthuli Ncube on October 1, has triggered economic upheaval, marked by shortages, price increases and panic buying.
While warning government that “economies are not developed through over-taxation”, the CZI said it recognises the need to expand the revenue base and plug the budget deficit.
“CZI was therefore initially opposed to an uncapped 2% tax and had proposed a cap which would achieve the aim of widening the tax base without over taxation. However, given the gravity of the current crisis in confidence, we recognise that it is vital that the fiscal deficit is dealt with immediately,” CZI president Sifelani Jabangwe told reporters on Friday.
“The 2% tax, as subsequently modified by the Minister of Finance on 5 October, with further adjustments in consultation with the private sector, should go a long way towards closing the fiscal deficit and restoring stability to the economy. We therefore recognise the necessity of this tax as a short term shock therapy measure. The alternative is to have incomes further eroded by run-away inflation, increased shortages and a general decline in well-being. We therefore call on all stakeholders to accept this painful necessity to stabilise the economy.”
The industrial body, however, said the 2% tax would not be sustainable over an extended period and should be scrapped in December 2019, by which time government is expected to have resolved its fiscal imbalance.
The CZI also wants government to publish detailed regular updates on revenue collection and expenditure.
“Given that through this tax, we are inflicting pain on the entire economy and assuming collective responsibility to correct government errors of the past, the government is obligated to be fully transparent by accounting for the collections and use of the 2% tax,” the CZI said, adding that government should also allow businesses to reflect the cost in their pricing.
The CZI also urged government to fully implement its Transitional Stabilisation Programme (TSP) and follow through on restraining public expenditure and borrowing as well as the privatisation of state enterprises, among other policy measures.
“We would urge that all future policy pronouncements be done after a process of consultation. A formal multi-stakeholder review process should be established immediately to track progress on the implementation of the Transitional Stabilisation Programme,” the CZI said.