HE long awaited 2021 National Budget has finally come out and in keeping up with tradition, government has again offered no solutions to the struggling, jobless and starving masses across the country.
In fact, they piled on more austerity despite the fact most people are already stumbling in trying to reach the cost of living of nearly $20 000 for a family of five.
What is this austerity?
First, government has increased presumptive taxes which target informal sector players at a time when 60% of economic activity occurs in that space. And this is important to note as millions of Zimbabweans are using that sector to earn most of their incomes. The groups to be affected by these presumptive taxes include transport operators, hairdressers, informal traders, cross-border traders, restaurants operators and bottle stores, and the cottage industry. Hairdressers, for example, will pay monthly presumptive taxes of $2 500, restaurants and bottle stores $10 000, with the cottage industry paying a similar amount. Cottage industry refers to home owners who run businesses from their homes.
Informal traders that rent fixed government spaces will now be required to pay US$30 or its Zimdollar equivalent on a monthly basis. Government has also increased presumptive taxes on self-employed professionals. For example, medical personnel, engineers and legal self-employed professionals will pay $500 000 each in monthly presumptive taxes.
Architects and realtors will pay $250 000 and $1 million, respectively. Treasury has also ordered government ministries and departments to increase fees, charges and levies starting January 1, 2021. Treasury has also increased the Petroleum Importers Levy to USD$0.05 for both petrol and diesel which will affect smaller fuel providers as well as increase excise duty on diesel by 5 US cents. The immediate effect will be an increase in fuel which on its own leads to increases in prices of goods and services.
And if informal traders are thinking they can dodge these taxes, the Treasury has instructed the Zimbabwe Revenue Authority to establish a ‘specialised unit’ that focuses on MSMEs during the first quarter of 2021. The focus of this unit will be on the sector’s contributions to fiscal revenues and make sure it’s commensurate with the level of economic activity. Now, taxes should be paid and even the Bible gives that instruction, but how much should that be given massive unemployment, job losses and income erosion from a depreciating Zimdollar?
In its defence, the government is touting the raised the tax-free threshold to $10 000. However, the official cost of living is $20 000 with very few, outside of domestic workers, earning less than that amount. What this means is that the tax-free threshold is essentially moot for the 2,9 million in the formal and informal workforce.
Government has also announced that those renting government housing units will now only be allowed to stay at these premises for a period not exceeding two years. As such, current tenants who have exceeded the 24 months, will thus, be placed on three months’ notice to vacate the houses which will lead to homelessness in some cases. Lastly, with nearly nine million people facing food insecurity with weather forecasts not pointing to any improvements conducive for crop growth in the short term, $30,4 billion has been allocated to food and nutrition security. Broken down, this translates to $284.48 in monthly allocations or US$3.44 per person showing that developmental partners will continue to meet the gaps.
Heading into the 2021 National Budget, the total requests made from government ministries and departments amounted to $1,1 trillion or US$13,4 billion. With the 2021 National Budget being $421,6 billion (US$5,1 billion) one wonders how the very and overly optimistic 7,4% economic recovery for next year will be achieved.
Of course, government will do what it always does and blame targeted US sanctions and yet when asked about implementing reforms to access fresh capital it remains mum. We mention this because without re-engagement, government is heading down a rabbit hole it may not be able to get out of as it continues to live in a delusion that all is rosy when it’s not.
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