Plans by the Zimbabwean Ministry of Finance and Economic Development to introduce a 15% Value Added Tax on basic commodities have been shelved following the withdrawal of Statutory Instrument 20 of 2017. This victory for Zimbabweans and CSO activists follows public outcry against the imposition of the new levy which came into effect on 1 February 2017.Several businesses had taken advantage of the levy by increasing prices on meat, margarine, rice, potatoes and cereals many of which are unaffordable for many Zimbabweans.
With a per capita income of USD. 924.1 (as of 2015), one of the lowest in the world, the levy placed a significant burden on low income earners who already use a majority of their earnings on meeting basic needs. This form of fiscal reform which favours the predominant use of the VAT has hugely been pushed by the IMF as it has been effective in most developed countries. However serious considerations and consultation need to be carried out before such measures are executed as contexts are different, especially comparatives between developed and developing countries. VAT has been found to be regressive owing to its cross-cutting nature; as opposed to redistributing wealth (which should be one of the main aims of taxation), the levy has been shown to exacerbate already-existing inequalities.
Several stakeholder groups including Tax Justice Network-Africa had joined the call for the suspension of the levy and on February 8, the Minister of Finance- Hon. Patrick Chinamasa- announced the deferment of the tax ‘to allow for consultation with relevant stakeholders’. While making the announcement the Minister defended the levy by explaining that the ‘intention of the tax was to broaden the tax base, enhance revenue generation, promote administrative efficiency…enhance equity and fairness, among others.’
While African governments are coming under increasing pressure to finance internal development with domestically-generated revenues, proper impact analyses of the imposition of such levies must be conducted prior to execution. Questions are also abound as to whether increased revenues do really translate into expenditure on basic amenities as evidence in many developing countries indicates the opposite. African countries have a poor track-record of revenue management. This means that increasing revenue collection does not guarantee a better life for the poor who depend on public services.
As TJN-A continues to advocate for “A new Africa where tax justice prevails to contribute to an equitable, inclusive and sustainable development”, the Network welcomes this deferral as an opportunity for exploration of means to increase the government’s revenues in an equitable manner but also calls for greater accountability on the part of revenue expenditure.
Photo courtesy: Nehanda Radio