/ 18 September 2014

Impoverished Zim squeezes poor

Secondhand cards in Zimbabwe.
Secondhand cards in Zimbabwe.

The Zimbabwean government is shaking down its own citizens for cash because there are no foreign donors or investors willing to cough up – and it is poor people who are feeling the brunt.

With no external budgetary support and the country increasingly importing more than it exports, citizens have become the government’s target as a source of income.

Finance Minister Patrick Chinamasa said his biggest challenge was to “raise additional revenue to finance nondiscretionary expenditure”, and has increased excise duty on diesel and petrol.

At his mid-term fiscal policy review last week he announced a range of new taxes and levies on goods such as beverages, blankets, imported soap and furniture.

Tenants living in low-cost government houses must now pay higher rent in order “to raise adequate funds to refurbish and … maintain the housing units”.

Not even charities have been spared. Donated goods, said Chinamasa, ended up being sold, and so rebates on duty on imported foodstuffs for welfare groups were removed.

Taxes account for 94% of all government revenue, according to labour economist Godfrey Kanyenze, and he said the state will continue to seek new ways to squeeze money out of people as long as it remains un-able to get foreign financial support.

The biggest shock was Chinamasa’s 5% tax on cellphone airtime and a 25% duty on cellphones.

Virtual collapse
And he doubled duty on imported passenger cars and said this was to protect local car assemblers. In reality, though, there is little left of the car industry. Zimbabwe is spending more than $1-billion a year on used car imports from Asia, which has led to the virtual collapse of the local car assembly industry.

Former finance minister Tendai Biti said the new tax measures would have the opposite effect of what the government intended.

“It is fiscal fascism and … shows we should expect to see further standstill and deepening of recession, general increase in inflation and a further reduction in revenue because companies will close,” Biti said.

In August, the government authorised new taxes on street vendors. The Zimbabwe Revenue Authority (Zimra) expects to earn $45nbsp;000 a day by charging them a dollar a day to trade. After years of economic turmoil that has destroyed industry, informal trade is now Zimbabwe’s biggest employer, and the new measures have attracted anger.

“Most vendors are living from hand to mouth and struggling to remain in business,” the National Vendors Union Zimbabwe said.

Reserve Bank of Zimbabwe governor John Mangudya said: “I know taxation is never anything that people want but it’s necessary to ensure that the government can balance [its] books.”

Revenue was $112-million less than projected, the result of lower income from corporate and income tax as more companies shut down or simply defaulted.

Zimra has now turned to the courts for garnishee orders and is raiding the bank accounts of companies that fail to pay their taxes on time. Government departments have not been spared, with garnishee orders being issued this year against the Civil Aviation Authority and municipalities.