EDITORIAL COMMENT: Budgetary support for car assemblers plausible

chronicleWe must brace ourselves for tougher times, with price increases likely, not only on luxuries, but also on basics after Finance and Economic Development Minister, Cde Patrick Chinamasa reviewed some taxes on Thursday.
Presenting the mid-term fiscal review statement, Cde Chinamasa also gave a deserved boost for the furniture and food manufacturing sectors. He raised import duty on cooking oil, maize meal, and beverages, fresh and processed horticultural produce and furniture.

With effect from yesterday, excise duty on diesel and petrol went up by five percent respectively to 30 and 35 percent. It would be more expensive to import a vehicle, even the smaller ones of less than 1,500cc which used to attract lower tax, after the minister hiked customs duty. Operating a mobile phone would be more expensive too as five percent duty on airtime and 25 percent on handsets would be levied from next month.

Fringe benefits, often enjoyed by company managers and executives on top of their salaries, would be subject to tax. He directed government departments and parastatals to buy vehicles from local assemblers.

Economic prospects are dim, said the minister. The gross domestic product is forecast to grow by 3,1 percent down from the initial projection of 6,1 percent. The forecast is realistic as it is clear to everyone that the economy remains in trouble.

We don’t like it when tax on fuel is increased because like electricity, fuel drives the economy. Any duty hike automatically pushes the fuel price up followed by price increases across the economy. In the end, the consumer bears the cost.

Zimbabweans are struggling. Many don’t have money and are borrowing to survive. They are in debt and defaulting. New tax increases on fuel will potentially make life more costly.

But realistically, Cde Chinamasa had no option to raise revenue to meet national obligations amid the prevailing poor economic performance.

We are encouraged by his pledges to the farming sector. The government, he said, will ensure early access to inputs by farmers, fund cloud seeding, introduce an input supply facility in collaboration with the private sector and raise $252 million for the Presidential Inputs Scheme.

Government’s consistent support for farmers to promote food security and general farm output is plausible. We harvested enough food this year thanks to timely and adequate support from the President and government. That must continue.

Food manufacturers should view the government’s restriction on food imports as a strategy to create a market for them domestically.

This is a challenge for them to enhance production knowing that the local market is there for them. We don’t expect them to fail to meet demand which is expected to rise given the upward review on import duty and resulting reduction of imports.

At the same time, the anticipated higher demand is not an incentive for the food processing sector and retailers to increase prices, please. The principle of demand and supply applies, yes, but local industry has a reputation for abusing it. That must end.

Cde Chinamasa introduced excise duty, particularly on mobile phones to curb non-essential imports. His statement coincided with a Zimstat report that Zimbabwean women spent $13 million on fake hair imports over 18 months ending July. It is a staggering amount of money spent on hair, a luxury of luxuries. Our women are becoming more conscious of their looks but an artificial look must come at a price. The minister might want to have a look at what the make-up industry contributes to the economy by way of tax.

On vehicles, there are no realistic and satisfying options locally; so many Zimbabweans are importing used vehicles from Japan, UK, US, Singapore and others. As this happens, local industry has been demanding government support to encourage people to buy locally assembled cars. To balance the equation, Cde Chinamasa increased customs duty on both used and new car imports, refraining from a total ban that some were speculating would come.

We encourage government and car assemblers to deliver on their promise for an affordable facility to make it possible for people to buy new, locally-made cars. Duty on airtime comes only weeks after Potraz announced that it was engaging mobile communication operators for a possible decrease in tariffs to levels comparable to our neighbours’. The authority said mobile calls are more expensive to the tune of 30 percent of the regional average. If Potraz is correct and industry agrees, the five percent duty is unlikely to cause a tariff adjustment as we were already being overcharged.

We are happy with the import duty review on foodstuffs and another package for farmers, but concerned about more excise duty on fuel and the slow GDP growth.

By and large, Cde Chinamasa delivered a balanced, practical fiscal statement in our difficult circumstances.

 

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