The Confederation of Zimbabwe Industries (CZI) has said the proposed 2 percent transaction tax legislation should be time-bound and end in December next year to give confidence that it is a short term shock therapy measure.
Last week, Finance and Economic Development minister Mthuli Ncube reviewed the intermediated transfer tax to 2 percent for per dollar transactions above $10 from the 5 cents per transaction currently in place. Transactions above $500 000 would attract a flat tax of $10 000.
In a press conference Friday, CZI president Sifelani Jabangwe said while the 2 percent transaction tax was designed to close the fiscal deficit and restore confidence in the RTGS system, Government has to put extra effort to successfully implement Transitional Stabilisation Programme within the 2 percent tax time frame and achieve desired results of trimming budget expenditure and privatisation of public entities.
“We propose that the tax expires by December 2019 at which point we expect that Government would have adjusted its expenditure mix to match collections and more targeted ways of broadening the tax base will have been developed,” Jabangwe said.
“In order to demonstrate sincerity on the part of government and give the market confidence that this is indeed only a short term shock therapy measure, the enabling legislation for this tax should be explicitly time-bound.”
He said the tax was not sustainable over any extended period of time as it “taxes each stage of the value chain and negatively affects the growth and competitiveness of value chains”.
Jabangwe called on Government to “play its full part in stabilising the economy and sharing the associated pain by implementing the measures outlined in the TSP and returning to a zero deficit position as soon as possible”.
“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 percent tax,” he said.
Jabangwe said industry was therefore initially opposed to an uncapped 2 percent 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, he said, CZI recognises that it is vital that the fiscal deficit was dealt with immediately. Jabangwe called on all stakeholders to accept this “painful necessity to stabilise the economy”.
Jabangwe said as long as adequate supply of official foreign exchange is made available, prices will remain affordable and industry members will be working day and night to ensure product supply.
“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,” he said.