HON. PROF. M. NCUBE: Thank you once again Mr. President. For emphasis, if you look at Government borrowing compared to borrowing by the private sector Government is borrowing about 62% of the entire credit available in the financial sector. Government is crowding out the private sector, yet we know that…
[Cellphone rings.]
THE HON. DEPUTY PRESIDENT OF THE SENATE: Order. Minister!
HON. PROF. M. NCUBE: I am sorry Mr. President.
THE HON. DEPUTY PRESIDENT OF THE SENATE: I am sorry Hon. Minister , you may proceed.
HON. PROF. M. NCUBE: Thank you Mr. President. Government is borrowing 62% of the credit available in our financial system and only the remainder is available for private sector and quasi Government institutions. Clearly, the Central Government is crowding out the private sector and yet we want the private sector to receive the bulk of the credit so that they can develop projects, employ more people and create jobs. This is an uncomfortable situation that I am determined to turn around.
I now want to take this opportunity Mr. President, to explain the rationale behind the 2% tax on financial transactions. In order to tackle the budget deficit that is huge, I need two approaches. The first approach is to expand revenue. The second approach is to contain spending. Going back to expanding revenue, the 2% tax was introduced in order to expand the revenue, to expand the tax base. The economy has grown as I have explained, it is bigger than we think but also the economy has become more informalised. In that process, it has become more electronic in terms of means of transactions. Therefore, it became very useful for us to think of ways of introducing a tax that will speak to informality, that will also spread the tax base in the way that I have tried to explain. This electronic transaction tax was the way we thought about this. I am sure there are other ways and options but we think that this is the best.
If you observe globally, I do not know whether you read the news about what happened in the UK yesterday, where the Minister of Finance in the UK is thinking of a similar 2% tax on electronic transactions; they call it a digital tax. It is very similar. Do not be surprised if this Zimbabwe tax that we started here is going to be copied all over the world, especially in developed countries – [HON. SENATORS: Inaudible interjections.] –
THE HON. DEPUTY PRESIDENT OF THE SENATE: Order. You will have an opportunity to interact with the Minister. He is delivering his Statement, there is no need to interrupt him.
HON. PROF. M. NCUBE: Thank you Mr. President. In the rest of Africa, you also have other countries that have a similar tax or a variation of it such as Tanzania, Kenya, Uganda and Senegal. These taxes are far more widespread than we realise. This tax is dealing with the revenue side of dealing with the problem. On the cost containment side Mr. President, during the Budget Speech, I will outline measures for dealing with Government waste and cost containment. For a start, we have not yet authorised the purchase and issuance of our vehicles for the Legislature and for the Executive. I know that only the chiefs got some vehicles but not everyone else. Again, we need to signal to the Zimbabwe people that we are serious about cost containment. We will deal with the issues such as travel, wage bill, enforcing retirement policy and so forth. The list is long in terms of cost containment and I will outline this in the Budget. I believe there is political will to see this through and certainly, the President, the Head of State has shown his commitment in following through on this cost containment.
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