Zimbabwe Finance Minister says 2% tax was right thing to do, whatever your politics

Zimbabwe has been able to allocate $100 million to mitigate the impact of Cyclone Idai which devastated eastern Zimbabwe leaving more than 300 people dead because of its highly unpopular two percent tax introduced in October last year, Finance Minister Mthuli Ncube said.

Writing in his weekly column in the Herald, Ncube said he was quite aware that government’s decision to introduce the tax was highly unpopular but it was the right thing to do.

“In just six months, the 2 percent tax has helped us to cut the deficit, invest in vital infrastructure, and put aside a sizeable sum that is being used to mitigate the effects of Cyclone Idai,” he said.

“Simply put, the 2 percent tax enables us to help those desperately in need of our assistance. Whatever your politics, whether popular or not, it is the right thing to do.”

Ncube said the purpose of the tax was twofold.

“First, it was intended that the 2 percent tax would raise significant revenue to be used to balance the budget and finance various priority development programmes. The tax’s performance in this regard has exceeded all expectations, and to date, we have collected $449 million,” he said.

“This money has helped to cut the monthly budget, for example from a US$242 million deficit in November to a surplus of US$733 million in December, and has also gone towards key projects such as dualisation of Norton strip of the Harare-Bulawayo Highway.

“The second goal for this tax was to give government the ability to fund inescapable and unforeseen expenditures, without recourse to debt creating instruments such as Treasury Bills, through the establishment of a dedicated and ring-fenced fund.

“We are well aware that we live in a region in which natural disasters are becoming sadly ever more common, and that therefore, government must have the ability to respond to such events without creating further debt. The ongoing Cyclone Idai disaster is one such event.”

The Finance Minister said there was, however much more to do as the money allocated to Cyclone Idai was one tenth of the estimated $1 billion required to cater for non-infrastructure supplies as well as quick infrastructure rehabilitation of roads and bridges, power, communication, irrigation, housing and water.

“The scale of the need will require the coordination and support of public, private and development partners, and while we greatly appreciate all the support we have already received, much more is needed,” he said.

“But what Cyclone Idai has done is to reaffirm the need for long term economic planning and sobriety, even if it is unpopular.

“Nobody likes to be asked to pay more taxes, certainly not those who are already struggling to make ends meet. We are aware of this, and are doing all we can to spread the burden evenly, and minimise what we ask for from those who have the least.”

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