Biti and Mthuli Ncube battle it out over rationale of 2 percent tax

Former Finance Minister Tendai Biti and current minister Mthuli Ncube yesterday battled it out as Biti accused the President Emmerson Mnangagwa administration of burdening the already overtaxed Zimbabweans with a two percent tax when the challenge should have been to cut government’s runaway expenditure.

Ncube said the government was indeed going to drastically cut its expenditure and the budget deficit which is currently double digit (Biti put it at 25 percent of GDP) should be reduced to below 4 percent over the next three years.

Bit and Ncube also differed on whether Zimbabwe was in recession or not with Biti arguing that the country was in recession so it was actually “cruel” to tax the people, but Ncube said the country’s economy was actually growing and he had revised the growth rate to about 6 percent this year.

Ncube said the country’s gross domestic product had also been rebased from $18 billion to $25 billion.

“This was not me, this is something that my esteemed Hon. Member knows about,” Ncube said.  “Every five years, countries re-base whether in Africa or wherever, I can name them.  It is normal and I can assure you that in another five years, we will re-base again.  So in short, the economy has expanded.  Just check the number of ‘mushikashikas’ as an indicator, on the road, you will agree with me that there is economic activity out there.”

Below is the full debate:

HON. BITI:  Hon. Speaker Sir, my question is to the Minister of Finance and Economic Development.  In view of the fact that the biggest challenge we are facing is the challenge of over expenditure and budget deficit that is now over 25% of GDP;  also, in view of the fact that Zimbabweans are actually overtaxed, the percentage of our revenue to GDP is over 30%. Why did the Minister introduce the transaction tax of 2% to the people of Zimbabwe when the challenge and obligation should be on expenditure retrenchment and not looking for more resources – [HON. MEMBERS:  Hear, hear.] –

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE):  Hon. Speaker Sir, I think that it is opportune that the Member of Parliament is a former Finance Minister and he has full knowledge of what it takes to run that office.  It requires determination, energy and focus and sometimes you walk on your own.  Let me come to the question.  When it comes to the strategy for reducing expenditure and increasing revenue, you need to be innovative but the ultimate goal is to reduce the budget deficit.

It is quite clear that the budget deficit is double digit, which is quite high by African standards and also by global standards.  As Treasury and the Minister of Finance, we are determined to cut this deficit down to single digit.  In the Pre-budget Strategy paper, I have given a trajectory as to how the evolution of the budget deficit will look like over the next three years towards that lower single digit figure of below 4%.  That is the roadmap to cut that down.

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