The raft of taxes imposed by the hard-pressed government could do more harm than good to Zimbabwe’s economy, as the move overburdens long-suffering citizens and threatens small businesses’ survival, economic analysts have warned.
They said as the desperate President Robert Mugabe administration “lays hands on anything that gives it money”, the latest move to target the informal sector — currently sustaining the country’s moribund economy — poses a risk of killing the goose that lays the eggs.
Last Friday, government gazetted new taxes for commuter transport operators, hairdressers, driving schools and cross-border traders.
The informal traders will pay at least $10 per month — a move widely viewed as overburdening long-suffering Zimbabweans.
Apart from taxing the informal sector, government has also introduced a five percent health levy on airtime while the struggling citizens also pay the Aids Levy and their salaries are significantly taxed under pay-as-you-earn (Paye) of at least 20 percent.
Motorists are also taxed through toll fees and vehicle licences, with authorities planning to introduce urban tolling.
Recently, the government imposed a 15 percent value added tax (VAT) on meat and potatoes, which was later reversed following fierce outrage by consumers.
Respected economist Witness Chinyama said “the current economic situation has pushed the government to look for anything they can tax to meet their monthly obligations. This shows they are desperate to get money from any source they can lay their hands on”.
“The problem with trying to formalise the informal sector is that the informal sector will simply go underground and the economy will go down as well,” he said.
“At one point, the government also tried to tax basic commodities such as potatoes and rice until people complained and the decision was reversed,” Chinyama said.
“It is also important for the government to encourage production and re-engage with other countries as a way of boosting revenues,” he said, adding that rather than target the informal businesses, which are struggling to keep up in the prevailing tough economic environment, “government must create a conducive environment for the sector to thrive”.
According to the Zimbabwe National Statistics Agency (ZimStat)’s 2015 report, 94,5 percent of the 6,3 million people defined as employed in the country work in the informal economy.
Not only is the size of the informal sector important, but the extent and speed of the industry’s growth.
Comparable data for 2011 — published by ZimStat — indicate that in the three years to 2014, informal sector employment grew by a staggering 29 percent, from 4,6 million to 5,9 million jobs.
Another economist, Francis Mukora, told the Daily News “although taxing the informal sector may sound like a great idea to the broke Zanu PF government, they should proceed with caution as there are no quick fixes to the country’s multi-faceted crisis”.
“Almost all of the informal traders such as street vendors and backyard business operators are extremely poor people with no assets, savings or social safety nets to fall back. Taxing these low-income families is not only insensitive on the part of government but also heartless,” he said.
“We must never lose sight of the fact that small and medium enterprises (SMEs) are currently paying tax, one way or another,” Mukora warned, further stating that “they are saddled with VAT, import duty, council levies and a plethora of other taxes”.
“To continue accusing the small businesses for the State’s ever-dwindling revenue base and collections is unhelpful. The government must first get its politics right and everything will fall into place,” he said.
Following concerns by legislators over government’s multiple taxes, Finance minister Patrick Chinamasa recently said “if you do not want to be taxed, please do not . . . expect better service delivery”.
“Our people in the informal sector do not want to be taxed. When a black person takes over a business, they do not want to pay taxes. If we want good health, education and roads, we need to have a culture of paying taxes. Who then is supposed to pay taxes, as I cannot tax foreigners?” the Treasury chief was quoted as saying in the local media.
Chinamasa said for every $100 collected as revenue, three percent was going towards service delivery while the rest was gobbled by the bloated civil service wage bill.
Government has been struggling to service its burgeoning expenditure and pay civil servants on time due to severely strained revenue streams.
Meanwhile, according to last Friday’s gazette, authorities were given legal teeth to compel the “operators of hairdressing salons (to pay) $10 per chair per month” while “informal cross-border traders (will pay) 10 per centum of the value for duty purposes of the commercial goods being imported…”
“Operators of omnibuses for the carriage of passengers with a seating capacity for 15 to 25 passengers will be required to pay $45 while those of between 25 and 36 passengers will part with $70 a month,” it added.
The new wave of taxes, with effect from January 1, 2017, brought into being by the Finance Act 2017, will also affect driving school operators, with those for class four vehicles being required to pay $100 per month.
Class one and two vehicle operators will part with $130 a month.
“The presumptive tax chargeable in terms of Section 36C of the Taxes Act shall be in case of . . . operators of taxi cabs for the carriage of passengers for hire or reward having seating accommodation for not more than seven passengers, $25 per month for each such taxi cab so operated,” the gazette reads.
“Operators of goods vehicles having a carrying capacity of more than 10 tonnes but less than 20 tonnes, $200,” the gazette reads, adding that goods vehicles of 20 tonnes or more will be required to pay $500 per month.
Companies which are not resident in Zimbabwe but “carries on a business in the country through a permanent establishment in Zimbabwe” will be liable to tax.
The meaning of permanent establishment, according to the gazette, is a company that has a fixed place of business in the country through which the business of the company is wholly or partly carried on.
However, there was some relief for small-scale miners whose presumptive tax is being calculated at zero percent of each dollar of the purchase price of metals.