I was joined yet again by Economist and former member of the Reserve Bank of Zimbabwe’s Monetary Policy Committee Eddie Cross to talk about financing a nation, tax collection and administration as well as electronic transactions
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Former member of the Reserve Bank of Zimbabwe’s MPC Eddie Cross joined us to talk the state of the Economy. The differences in policy from Zimbabwe to Rhodesia as well as if SI 127 still applies to businesses trading out side the forex auction.
Eddie Cross: I’m excited about the Zim economy
If you deposit USD into a local foreign currency account, that money is not covered by the Deposit Protection Corporation (DPC). This means if a bank goes belly up there are few guarantees that your forex could be recovered.
Deposit incentives but no protection for USD, the mess that is Zim’s monetary policy
One week after SI 127 and well there are no prizes for anyone. Because experts, pundits and even armchair economists were all right about the effects of the statutory instrument.
One week of SI 127: experts & armchair economists were right
ZIMRA recently gave a grace period for the importation of cars that are 10 years or older. Now, this comes after the ban the govt instituted in April 2021 which leads us to believe it’s all about the revenue dip ZIMRA was experiencing on its end.
Extending 10-year-old car imports after “the ban” is all about the money
Zimbabwe’s Cannabis grower’s licence is priced way too high and this is keeping the country from a rapidly expanding and lucrative industry.
The cannabis growers licence fee is keeping Zim from a billion-dollar industry
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8 comments
These transaction based taxes are day light robbery. Banks make it so difficult to claim IMTT on “self” transactions, so most people don’t bother to do it. And, monetary value is lost without any value adding services being rendered, as if you were using a money transfer service. This “brilliant” economist now wants it to be a 6-7% overhead including bank charges. If you lend someone 100 dollars, effectively, they owe you 107 as fair restitution. 🤷🏾♂️
There should also be no PAYE at all. Transaction based taxes shouldn’t co-exist with any other form of taxation, PAYE just means formally employed people are being taxed twice. Firstly, when they are paid and again when they spend their earnings.
Given the very low proportion of Zimbos who comply with tax laws, it would be sensible to shift to a system based on the harder-to-evade indirect taxes.
That’s because government are treating the symptoms, falling tax revenues, than treating the problem, high levels of unemployment (increasing informal activities). There’s no active effort to evade tax, you can’t pay PAYE when you don’t have a job and noone is quiting their job to avoid taxation.
Now, unemployed people, pensioners even children are being taxed when they transact. All in the name of meeting revenue targets in a flailing economy.
PAYE removal makes sense, only the employer should get taxed when they pay the employee an the employee when they transact, tax should be for money In motion for the part being taxed, how ever I’m not sure of the effects on gvt revenue
Now how is that fair on the employer’s part? The consequence of this arrangement is that the employee will be paid a lower salary with the excuse of paying taxes. If anything the way ZIMRA should operate is this, eliminate all the other taxes (like VAT) and leave the 5% transactional tax intact. That way you have a larger base to draw from whilst the stakeholders (us) are not over taxed.
No paying PAYE and just taxing companies, is just switching the point to taxation responsibility. Yes, the employee will (probably) get paid a lower salary because their current salary factors in PAYE. For example, if you are currently earning $100 gross and $60 nett, instead an employer would just pay you $60 gross which would remain $60 nett (I’m ignoring other things like NSSA, medical aid e.t.c to keep things simple). The employer now has $40 which remains with them to add to their tax purse.
Eddie: “Hi Valentine, it’s nice to be with you again. I thoroughly enjoyed the last session”
Valentine: “Alright, for this one we wanted to talk about…”
Hahaha Valentine. You’re too strictly business. Exchange a few pleasantries. Ask about a recent sports event, if he’s keeping safe with COVID, was it his second jab?
Anyways, I didn’t know about Ecocash allowing overdrafts, I’m shocked.
Taxing the informal sector will require innovation. Tackling corruption is key as it is a kind of informal tax. Reducing corruption makes it easier to tax the informal sector.
Just wondering. How would transactional tax affect international trade? How do exporters that buy locally taxed inputs price their goods? Do tourists get taxed prices? Sure they can get rebates but that’s unnecesary extra work.