2023 budget measures to steer more revenue generation

THE recent 2023 National Budget that was presented by Finance and Economic Development Minister, Professor Mthuli Ncube, contains several critical tax revenue measures, which have the potential to widen the country’s tax base and boost production in key sectors of the economy.

Improved production obviously has implications on creation, incomes and enhanced standards of living. Additionally, this is critical in accelerating economic growth towards industrialisation, modernisation and transformation of the country into an upper middle-income economy.

More importantly, Zimbabwe has improved significantly among 190 economies in the ease of doing business according to the latest World Bank report (from 159 in 2017 to 140 in 2022). To accelerate this global improvement in the ease of doing business, the proposed budget allows the mining companies, especially, to import specified equipment without seeking the parent ministry’s approval.

This has the potential of cost reduction on doing business in the mining sector and such a conducive regulatory framework is a key driver in attracting meaningful capital investment in the extractive sector and is good for meaningful economic development. While in the past, the Natural Resources Governance Institute had included Zimbabwe as one of the countries struggling with governance and management of natural resources such as minerals, oils and gas, the Second Republic has made great strides transforming the sector by implementing measures that have boosted both investments and output in mining.

Enhanced revenues from such natural resources can serve as one of the powerful tools to accelerate economic growth for the country and contribute more towards achieving Vision 2030.

In the 2023 budget statement, Prof Ncube proposed the remittance of 50 percent mineral royalties in form of minerals, 10 percent foreign currency and 40 percent local currency.

Such a measure has an effect of improving the country’ s revenue reserves, thereby creating a basis for championing the recapitalisation of key sectors of the economy such as agriculture, mining and manufacturing industries.

By 2017, countries such as Chile, Botswana and Tunisia were already realising good proceeds from mining resources and for Zimbabwe, the latest measures on depositing royalties in the consolidated revenue fund would help promote transparency and accountability.

This will also bring confidence to different sectors of the economy while funds generated can only be drawn as provided by Section 302 of the Constitution of Zimbabwe with proceeds being used to capitalise key sectors of the economy.

The re-introduction of import duty on basic commodities has the potential to raise more revenues to the fiscus while protecting local industries, including budding entrepreneurs from cheap foreign competition.

Further, the 2023 budget proposed the removal of custom duty on additional equipment, which is critical for sectors such as agriculture, energy, manufacturing and mining.

World Bank

This is expected to promote the ease of doing business as more capital investment will be made easier. Jurisdictions such as Hong Kong in China, Macao, Sudan and Brunei Darussalam, have 0.0 percent weighted mean applied tariffs and this has resulted in economic growth for their people.

Specifically, the acquisition of machinery and equipment is a form of capitalisation, which has a long-term positive effect in the production of goods and services.

We, therefore, expect the measures crafted by the Minister Ncube to yield positive results.

Taxes

In order to raise necessary funds to combat diseases such as cancer, diabetes and hypertension Minister Ncube has proposed ring-fencing and increased import tariffs (from US$0.05 per litre to $0.10 per litre on excise duty) on imported energy drinks.

Revenue generated from this could go a long way in assisting the acquisition of cancer treatment machines like radiotherapy. Such a bold initiative can help provide free medication for cancer, diabetes and hypertension patients, whose costs are beyond the reach of many.

In view of the Ukraine-Russian war and its adverse impacts on global value chains, especially wheat and fertiliser supply, Prof Ncube has proposed an exemption of two percent Intermediate Money Transfer Tax (IMTT) on wheat products as approved by the Agricultural Marketing Authority.

This measure is likely to reduce the food crisis cost burden and somehow lead to the stabilisation of bread prices.

In order to enhance efficiency and effective revenue collection measures, the proposed budget insists on the implementation of strong monitoring and regulatory mechanisms such as the disqualification of expenditures that lacks fiscal invoice.

It is imperative for taxpayers at this juncture to follow the legal requirement of fiscalisation to ensure that transactions are recorded accordingly in an unalterable manner and accuracy Value Added Tax (VAT) calculations. This has the potential of mitigating the level of revenue losses through tax avoidance or tax evasion.

The above mechanism has helped industrialised, mostly European countries, to enhance revenue collection and reduce tax fraud.

Minister Ncube’s budget therefore has the potential to unlock more tax revenues to accelerate economic growth.-chronicle.cl.zw