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2% tax is paying for subsidies: Guvamatanga

By Daniel Chigundu

Permanent secretary in the Ministry of Finance and Economic Development George Guvamatanga says the 2 percent tax is necessary as it will fund subsidies that Zimbabweans enjoy.

The government introduced a 2 percent tax earlier this month which is levied on all electronic transactions across all platforms.

Under the tax, the government gets a 2 percent tax on every dollar that is transacted after the first US$10; however, the tax drew a lot of criticism in the market.

Giving oral evidence to the Parliamentary Portfolio Committee on Budget and Finance as part of the on-going 2019 budget consultations, Guvamatanga said the tax came to ensure that everyone contributes to the funding of the subsidies.

“The structure of this economy has significantly shifted and it has largely gone informal and there was no opportunity for those in the informal sector to directly contribute to the government revenue, but let me paint you a picture here.

“Each and every citizen of this country enjoy when compared to other countries or any other region they enjoy cheap bread which is subsidised by government, they enjoy cheap maize meal which is subsidised by government, they enjoy cheap fuel which is subsidised by government, they enjoy cheap electricity also subsidised by the government and even enjoy cheap cooking oil also subsidised by government but the government needs to fund those subsidies,” he said.

Guvamatanga added that “we can’t expect a small population of this country to be funding the subsidies and for everyone else to be enjoying so this 2 percent tax, we might have conservations around the level of the tax, around the exemptions, but it is important to agree with everyone in this room including media that the principle of everyone must contribute is the right principle,” said Guvamatanga.

The former Barclays Bank of Zimbabwe managing director said the introduction of the tax was not open for debate but that conservation can be centred around such areas as the level, quantum, duration and exemptions only.

“So if we start our conversation from the point which says each and every citizen of Zimbabwe should contribute, then we shift the conversation to a different level which says what is the quantum of the contribution because there isn’t anyone who has not enjoyed cheap bread, cheap maize meal, cooking oil, electricity, fuel in this room I would want to see that person if they are there,” he said.

The permanent secretary added that the subsidies are part of the reason for the current budget deficit in the country adding that it will not be fair to allow a few people to carry the whole budget while the majority are only enjoying without paying.

“We can quantify the level of these subsidies, they run into billions and they are also the reason for the budget deficit but not all of it, we can actually demonstrate that as a government that some of the budget deficit has been incurred so that we can support these social nets to protect the citizens of Zimbabwe but then we can’t only have 4 percent contributing to taxes and the other 96 percent just benefitting.

“But we are happy to engage, to refine the tax so that we make it more affordable, more sustainable but the underlining principle is that it was a necessary pain to bear,” said Guvamatanga.

However, some legal and economic analysts are of the view that the tax is currently illegal as it supposed to get Parliament’s approval.

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