Major highlights of the Mid-term policy
Government bids to bring the wage bill down to 40 percent of expenditure.
Surtax on second-hand light motor vehicles – five years and older rose to 35 percent from 25 percent from September 1 2015.
Government ban importation of second hand clothing and shoes.
Basic goods such as groceries to be removed from travellers rebate effective August 1 2015.
Royalties for small-scale miners reduced from three percent to one percent. Tax amnesty moved by four months to October 31 2015.
No taxes on church tithes and offerings, but other income-generating projects are liable to taxation.
THE mid-term fiscal policy presented last week by Finance Minister Patrick Chinamasa seeks to enhance competitiveness and stimulate economic growth as it addressed a number of challenges that have been choking the business environment.
Issues addressed in the fiscal policy include low industrial productivity, competitiveness, high taxes, falling revenue inflows, rising imports, stagnant export growth and an unsustainable State wage bill.
Government banned used clothing and shoes-commonly known as ‘mabhero’ with effect from September 1 2015.
Minister Chinamasa said the measure is aimed at enhancing competitiveness of the local industry, currently facing stiff competition from cheap imports that have flooded the local market.
“I, therefore, propose to remove second-hand clothing and shoes from the Open General Import Licence,” said Chinamasa.
“Furthermore, any future importation of second-hand clothing and shoes will be liable to forfeiture and destruction.”
Zimbabwe’s textile and leather industry has since dollarisation been under siege from the influx of imports, especially finished second-clothes, shoes and leather products that forced some of them to close down.
The sale of second-hand shoes and clothes had become so rampant along virtually all streets of the country’s major cities, towns and business centres, as most of the products were evading payment of duty.
The used products were sold everywhere including in front of formal retail shops, which negatively impacted on established businesses that pay rentals and taxes to the Government.
Hence the banning of second-hand clothing and shoe imports will help promote local industries thereby creating much needed employment with spin offs such as increased incomes for the workers which will make them buy better quality clothes not ‘mabhero’ from Europe and America.
Taxing exports such as skins and hides will force exporters to process them locally, again creating employment and all its associated benefits.
In an effort to reduce the country’s widening trade deficit – currently standing at US$1, 8 billion in the six months to June 2015, Government also removed rebates from imported groceries.
Chinamasa said the measure is aimed to cushion retailers from an influx of basic commodities from regional countries.
“Cross-border travellers continue to import groceries duty-free under rebate,” said Chinamasa.
“However, there is no justification for continued rampant importation, since locally manufactured products are readily available.
“I, therefore, propose to remove groceries that include maize-meal, meat, sugar and flour, among others, from the travellers’ rebate.”
The new measures also form part of extensive measures Government is taking to grow the economy, with economic growth rate revised down from 3, 2 percent to 1, 5 percent due to a poor agricultural season.
Chinamasa highlighted on remedies to solve the State’s unsustainable wage bill.
He said Government was concerned with the level of resources that employment costs continued to absorb from the National Budget at the expense of developmental expenditures and other expenses directed at Government operations and public service delivery.
“Hence, Cabinet has given a directive to the Public Service Minister in conjunction with the Finance Minister to urgently propose remedial measures to gradually bring down the share of the wage bill in the Budget from over 75 percent to under 40 percent,” he said.
“Most of the revenue is going to employment costs which now account for 83,4 percent of total expenditure.
“It is not healthy.”
Chinamasa said significant progress had been made to develop measures to rationalise the wage bill with the Public Service Commission having completed the physical head count for all civil servants as part of the government staff audit.
He said Cabinet would be considering the full package of necessary proposals in the next couple of weeks.
Cutting the civil service wage bill will end up reducing tax burdens on both individuals and businesses and this would increase their disposable incomes and purchasing power.
Minister Chinamasa called for a review of labour laws, in the wake of the rampant termination of employment contracts by companies following a recent Supreme Court ruling.
It is reported that more than 9 000 people have lost their jobs in less than three weeks after the court of appeal ruled that companies can dismiss workers on three months’ notice only without package.