Batanai Matsika 
MOST African governments are squeezed between poor citizens and big financial holes in public coffers. It is a reality that depending on aid or hand-outs alone will not do the trick, and politicians across Africa are asking more from their tax collectors.
Reserve Bank of Zimbabwe, governor John Mangudya and Finance Minister Mthuli Ncube
It appears that taxing citizens is the only feasible solution within their reach. Arguably, in many cultures and parts of history, from the tax collectors of ancient Israel to the IRS agents of today, the taxman has received more than his share of scorn and abuse.
Tax collectors are also mentioned many times in the Bible. They were reviled by the Jews because of their perceived greed and collaboration with the Roman occupiers.
Generally speaking, no one likes to pay money to the government, especially when the government is an oppressive regime like the Roman Empire of the first century. Those who collected the taxes for such a government bore the brunt of much public displeasure.
On November 26, 2020, the country’s Finance and Economic Development minister Mthuli Ncube presented the 2021 National Budget Statement. In a nutshell, the government set a ZWL421.6lbn (cUS$4.2bln) budget for 2021. Total capital expenditures constitute ZWL131.6bln (5.5 percent of GDP), while current expenditures are expected to consume ZWL290bln (12.1 percent of GDP).
The budget was also characterised by several revenue enhancement proposals earmarked at boosting public coffers. We summarise the main proposals here-under;
a There was a proposal to introduce a Cannabis Levy, chargeable on the value of exports, at varied rates of tax that correspond to the level of processing;
a Excise duty on tobacco and alcoholic beverages was increased;
a Excise duty rates for both diesel and petrol were re-aligned to US$0.30 per litre;
a Fuel imports shall be deemed to be in foreign currency under the Direct Fuel Importation facility unless the importer provides satisfactory documentary evidence to the effect that funds were sourced through the auction system; and;
a The government will be intensifying its efforts on the implementation of a presumptive tax structure on informal businesses. It was proposed to introduce a presumptive tax of an equivalent of US$30 per unit per month.
It should be highlighted that an environment characterised by (i) limited foreign direct investments, (ii) suppressed donor activity and (iii) a lack of financial support from multilateral institutions has forced the current administration to depend heavily on taxes.
New tax heads such as the Intermediated Money Transfer Tax (IMTT) have led to a general increase in the cost of doing business and has had adverse effects on vulnerable groups such as the unemployed (especially women).
As part of our analysis, we went back into history and assessed revenue enhancement and expenditure management measures put in place by former Finance minster Patrick Chinamasa in his 2018 National Budget. We summarise the main proposals here-under;
a A freeze on recruitment in the public service;
a Downsizing of diplomatic missions;
a Abolishment of the Youth Officer posts under the ministry of Youth, Indigenisation & Empowerment and transfer of the roles to the ward development coordinators in the ministry of Women, Gender and Community Development;
a Government to retire staff above the age of 65;
a No first-class travel will be permitted across the board save for the Presidium;
a Restrictions on the Class of travel based on grade;
a Introduction of staggered export tax rates on un-beneficiated minerals-export tax of 5 percent on the gross value of exported lithium; and
Sports betting – introduction of five percent levy on gross takings by bookmakers with effect from January 1, 2018.
Based on the comparison of the budgetary measures, it can be deduced that the rules of the game have shifted to “more direct taxes to local businesses and the citizenry”.
However, it should be noted that while Chinamasa was not aggressive on direct taxes, he was part of the economic team that printed money through the excessive issuance of Treasury Bills.
The result was a collapse in the monetary system and skyrocketing inflation. As Milton Friedman famously observed; inflation is taxation without legislation. It would seem there is not much of a difference between the “direct tax collector” and the “money printer”.
Overall, one should always evaluate the impact of presumptive tax measures on the informal sector and the implication on poverty levels within the general populace.
Informal sector players in Zimbabwe are already subjected to other tax-like payments. These include storage fees, market/ hawker license and toilet fees. Thus, when considering taxation of the small-scale sector, it is important to consider all payments that traders pay, not only formal taxes.
It is important to consider the impact that the new taxes have on the growth of small businesses, and specifically on gender equality. In most countries (including Zimbabwe), there are more women in informal employment than men. Because a higher proportion of women work in the informal sector, taxes on the informal sector fall on women more than men.
In conclusion, we maintain that the value-preservation quest remains. Our call on the stock market is that “park ZWL balances in export-oriented counters and regional plays’’. On top of our BUY radar are counters like ART Corporation, Hippo Valley, Simbisa Brands, SeedCo and SeedCo International.
● Matsika is head of research at Morgan & Co, and founder of piggybankadvisor.com. He can be reached on +263 78 358 4745 or batanai@morganzim.com / batanai@piggybankadvisor.com
