HARARE – Minister of Finance and Economic Development, Mthuli Ncube has defended the new 2 percent tax on all money transfers saying that austerity measures need to be adopted in order to stop the bleeding in the economy.
Ncube said that there could be no reforms without pain.
Presenting the government’s latest economic blueprint, Transitional Stabilization Programme (TSP), on Friday the Minister argued that the two percent tax is in line with what is happening in other markets.
However, he conceded that the new tax needs to be fine-tuned to ensure that it works as planned. He said that the tax was going to be capped and that exemptions will also be offered. Said the minister,
The 2% tax is necessary. We need to be pragmatic. We need to stop the bleeding. We need to take the pain…The economy is now more informal, previous tax regimes are no longer effective. I know this is a shock to people but we need austerity. Government will do its part…People don’t realize that they are already paying for a weak economy. This (2% tax) is one way we can fix our problems. The tax might be fine-tuned in the next budget.
Permanent Secretary in the Ministry of Finance and Economic Development, George Guvamatanga also said that part of the money collected from the tax will be used for social services. Said Guvamatanga,
Funds that are to be collected from the recently introduced 2cents per each electronic $1will be ring-fenced to prioritize social services such as health and education…Zimbabwe should brace for a little bit of pain as it addresses the challenges inherent in the economy
The tax has not been well received with critics arguing that the government is punishing the poor and taxing people for using electronic money yet there are cash shortages. Industry has also said that the tax will cut into its profits and may hamper the economy.