The Sunday News
WITH Finance Minister Patrick Chinamasa set to announce the 2015 National Budget on Thursday, analysts have called upon the minister to consider reducing taxes in a number of areas to reduce the burden on the citizenry.The Zimbabwean economy is in a rather precarious state, typified by low liquidity and a deflationary state.
Observers seem to agree that tax cuts could help boost an economy in recession by providing a stimulus in the sense that they provide flexibility, by giving people more disposable income.
This is believed to drive aggregate demand.
Econometer Global Capital head of research Mr Takunda Mugaga in an interview with BH24 acknowledged the tricky spot that the Finance Minister finds himself in, but said it was necessary to reduce some taxes, although others should be maintained.
“Indeed the Treasury boss is faced with a difficult task as he has to balance between driving the economy out of a cyclical recession and increasing aggregate demand. If figures coming out of corporates such as Econet, OK Zimbabwe and Delta are anything to go by, they are evidence of an economy which desperately needs resuscitation measures in terms of addressing poverty levels while at the same time increasing jobs.
“Harsh tax measures such as tax on airtime have to be reversed. The parking disc rates have to be revised from $1 per hour to $0,50 given the disproportional bill in relation to the disposable incomes. I am convinced Minister Chinamasa can intervene in setting the most efficient parking tax rate which will not encourage leakages through corruption tendencies,” said Mr Mugaga.
He, however, said the increased duty on motor vehicles should stay.
“However, I am of the belief that the increased duty on motor vehicles is welcome as this has seen a significant decline in car imports for the past 60 days. This is definitely a sober policy measure to address a gloomy external position as well as liquidity crunch which seems inspired by the substantial outflow of liquidity.”
And despite the fact that the mining sector is expected to register negative growth this year from an initially set target of over 10 percent due to the volatile prices prevailing on the global markets,Mr Mugaga said: “Minister Chinamasa cannot afford to relax royalties as this will only deepen the share of artisanal mining activities which have not been contributing anything to the fiscus.” – BH24
