Budget: taxes, beer cigarettes to go up?

Zimbabweans, hard hit by the ever escalating price increases and expecting some tax relief to enable them to make ends meet, could be in for a surprise as all indications are that the government may in fact introduce a drought levy to enable it to feed more than five million people who will need relief food.

The introduction of such a levy would in effect mean that workers and companies would have to pay higher taxes, so says leading Bulawayo-based economist Eric Bloch. He also believes the government may have to increase the excise duty on alcohol and cigarettes which in turn means that the manufacturers will increase prices of these commodities to keep afloat although they will face stiff consumer resistance.

The last drought relief levy was imposed in 1984-85 with individuals paying 5 percent from October to September while companies paid 10 percent from October to March. But then, that year’s drought was not as devastating as the present one under which the government will have to provide food until the next harvest if the rains do come. A total of $49.2 million was raised and deposited into a National Drought Fund.

Bloch said although the government had been donated money at the Paris Conference specifically for drought relief, it had to impose this levy because money donated was to enable the country to buy food only. The government still needed money to process the maize and distribute it to millers and to other centres in the country. The levy could also be used to meet the increased cost of health services since more people are likely to suffer from malnutrition.

There will also be the introduction of a land tax so that those with excess land can release it if it is not productive as already indicated by President Mugabe. This will facilitate the planned redistribution. Bloch said this year’s deficit is likely to be greater than anticipated and despite the trimming of the cabinet next year’s deficit will be higher than planned under the economic structural adjustment programme because of the drought relief and water development projects as well as the scheme to revitalise agriculture through which the government will provide credit to commercial farmers and inputs to peasant farmers.

He believes Finance Minister, Bernard Chidzero, will announce a lot of administrative changes in the Income Tax Act but this will not result in an increase or decrease in taxes themselves but will merely make the interpretation of the Act clearer.

Chidzero will also have to foreshadow negative growth for the coming year of at least 6 percent because of the effect of the drought and will have to indicate some slowdown on aspects of trade liberalisation as planned under the economic structural adjustment programme because off insufficient foreign currency.

Bloch said he also anticipated Chidzero to indicate some very real reduction of the civil service instead of just talking about the planned reduction as had been the case over the last two years.

Asked how this would be justified when President Mugabe had not set an example by trimming his cabinet effectively, Bloch said President Mugabe had indeed trimmed his cabinet as this had been reduced by 10 ministers and deputies and three ministries had been scrapped.

“It may not have been sufficient but there has been a real reduction. Let’s give the government credit where they deserve it. But whether this will mean a reduction in the civil servants from the ministries that have been scrapped or a transfer of the civil servants to other ministries remains to be seen,” he said.

When reminded that governors would be given additional powers and take on the role of resident ministers and thereby inflate the number of ministers, Bloch said this had been the case even in the past. It may be just a change of name but they had ministerial rank before, he said. What he queried, however, was the number of provinces as he believed these should be reduced to four and therefore there would only be four governors.

On whether the scheme to help farmers would work, he said, he did not see any problems with commercial agriculture as the money had been allocated to commercial banks by the Reserve Bank. This money would be lent as medium term loans on low interest rates.

The same should apply to peasant farmers but the big question is whether the government is well organised to handle this efficiently as administrative problems could delay this programme.

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