Food, fuel prices to increase

By Kudzai Chawafambira and Chengetai Zvauya

HARARE – Finance minister Patrick Chinamasa on Thursday unveiled a raft of measures and taxes to shore up Zimbabwe’s finances, in a development likely to overburden its already hard-pressed citizens.

In his mid-term fiscal policy, the ex-Justice minister imposed a 20 percent hike in excise duty for petrol and diesel, as part of desperate measures to raise cash for President Robert Mugabe’s government.

“In order… to finance inescapable expenditures, I propose to increase excise duty on diesel and petrol from 25 and 30 cents per litre to 30 and 35 cents per litre, respectively, with effect from September 15, 2014,” Chinamasa said in what was to be a televised address, but was reportedly overtaken by other political events.

With the cash-strapped government’s cumulative revenue collections for June 2014 amounting to $1,7 billion — against a target of $1,8 billion — a 6,1 percent shortfall of total projected revenue was recorded and just as first half expenditure raced to $2 billion. This exceeded the $1,8 billion target, while the civil service wage bill shot up to $1,5 billion, meaning total expenditure represented 76 percent.

But as part of efforts to prop up dwindling revenues in the face of swelling expenditure, Chinamasa announced tax increases on fuel, employee allowances and mobile phone airtime, and handsets with effect from September 15, 2014.

The Treasury chief further proposed to empower the Zimbabwe Revenue Authority (Zimra) to collect monies directly from employees or board members — current or resigned — from several institutions.

“Whereas the Income Tax Act obligates employers to deduct and remit PAYE to Zimra, the trend that has been observed, especially in public enterprises, is that fringe benefits were not subjected to employees’ tax,” he said.

Chinamasa admitted that government faced a significant challenge in raising additional revenue to finance non-discretionary expenditures, therefore, he has proposed to levy a five percent excise duty on air time for voice and data, with effect from this month.

The feisty lawyer also said he was proposing a 25 percent  customs duty on mobile handsets from October 1 and this has been necessitated by the fact that the previous reductions had helped Zimbabwe’s mobile penetration rate, and handset purchases to over 100 percent.

According to Chinamasa, the concession had outlived its usefulness and the Harare administration has also imposed a five cent levy on every mobile money transaction, and in accordance with his 2014 national budget.

Treasury, he said, had also proposed various duties on different foodstuffs on the basis that some of them were locally produced.

These include cooking oil, poultry, soap, maize meal, flour, beverages, dairy produce, furniture, sugar, fresh and canned fruits and vegetables, among others.

While the Finance boss said the measures would take effect from next month, economists were quick to warn that the duties were likely to cause price hikes, if not shortages.

Zimbabwe has become a haven for imported goods due to a massive de-industrialisation and the desperate Mugabe administration has gone a gear up by proposing to exclude selected foodstuffs imported by welfare organisations from duty rebates in order to encourage growth of the local industry.

“It has, however, been observed that some of the imported goods are produced locally. In some instances, the donated goods end up being sold on the local market,” he said.

The policy measures come at a time when government has no clue on how to revive industry due to a lack of adequate funding to retool and capacitate industries.

Chinamasa also proposed an increase of a range of vehicle duties to between 40 percent to 60 percent, in a bid to complement the local motor industry.

However, Zimbabwe’s local motor industry is already comatose as most people opt for cheaper second hand vehicle imports.

“The application of this measure will take into account the need to protect consumers from unfair pricing and substandard products. Furthermore, government Departments and parastatals will purchase motor vehicles from the local assembly plants in line with the Directive from the Office of the President and Cabinet issued through Circular Number 16 of 2011,” said Chinamasa.

As it is, Chinamasa’s policy has drawn the ire of several parties, among them former finance minister Tendai Biti, who says they are anti-poor and bound to reverse economic gains made in the past four years.

“There is no hope in this policy. We are going to see the deepening of the economic crisis in the country as we are experiencing economic recession. I can foresee a shortage of goods in the shops, as we introduce some duty of certain food stuffs.

“The effect of the increase in the fuel will foresee an increase in everything across the board,” said Biti.

Crucially, Chinamasa said government had revised the 2014 economy growth rate from 6,1 to 3,1 percent and was going to bring a revised budget in Parliament for approval as he had missed some of his targets.

Some of the taxes are on second hand clothes and blankets as well as charitable organisation initiatives.

Kuwadzana East legislator Nelson Chamisa said Chinamasa had set the stage for a total economic meltdown, with a plethora of taxes which does not help in the revival of the economy. Daily News