Market reacts negatively to 2% tax increase

The view of Harare from my room at the Rainbow Towers Hotel. The tall building to right (about 300 m away) is the headquarters of the ruling party, Zanu PF.
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The general reaction from the market to the two percent tax increase for every dollar electronically transacted has been negative as price increases have started being effected to basic commodities and services less than 48 hours after the presentation of the monetary policy statement.

The average national poverty datum line for Zimbabwe is around $500 for a household of five people.

This money caters for food and non food items for the family not to be deemed poor, assuming food will take $200, shelter $150, transport $50, other essentials $100.

Now with the 2 percent tax proposal for every dollar transacted it means this household will be $10 short on its monthly obligations considering the fact that 97 percent of payments made in Zimbabwe are done electronically.

Added to that the market has already responded negatively to the two percent tax charge by increasing prices of basic commodities to cater for the extra charge.

This is according to a survey done by Confederation of Retailers Association today, passing on extra monetary obligations to that same household already $10 short on its requirements.

“We have done a market survey this morning it seems the market has just responded negatively by effecting price increases on most basic commodities to cushion themselves to the tax,” said Confederation of Zimbabwe Industries president Mr Denford Mutashu.

Government insists austerity measures like these are necessary to turn around the economic fortunes of the country as they will put Zimbabwe on a positive recovery path albeit the painful process.

Industry and Commerce Minister Mangaliso Nqobizitha Ndlovu added government is ready to engage stakeholders to achieve the intended success

“It is necessary for Zimbabwe to endure the painful process of increasing the tax base for revenue inflows to increase as well so that those resources are channelled towards the resuscitation of the economy,” said the minister.

Like in any situation where discipline is demanded, the stabilisation programme is bound to receive criticism from a variety of politicians and economists alike but a national effort is required to accept the reality for the nation to start moving forward