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Sunday, April 18, 2021

Budget does little for social protection, poverty alleviation: Experts

The 2021 national Budget presented by Finance and Economic Development Minister Professor Mthuli Ncube recently, does little to address poverty alleviation and social protection for the vulnerable households, experts have concluded.

The budget proposes a raft of tax measures that are expected to affect the poor predominantly.

The tax measures include presumptive taxes for small businesses, an increase in fuel import duty and insufficient Pay as You Earn relief for low income earners.

Speaking during a debate on ZTN television hosted by the Zimbabwe Coalition on Debt and Development, economic and social justice expert said tax concession proposals in the budget do little to provide relief for the poor.

Zimcodd executive director Janet Zhou said the widening of PAYE tax free thresholds remains below the Poverty Datum Line.

Treasury proposed to raise the income tax-free threshold to $10 000 per month up from $5 000, a concession which remains below the PDL at around $19 000.

“The big issue here is the expansion of tax bands and thresholds and the tax free bonus threshold,” she said.

“But this has been a case of giving with one hand and taking back with the other.

“One of the issue with this budget is the issue of the shrinking tax base and in trying to widen the tax base.

“He (Minister Ncube) introduced new and higher taxes – presumptive taxes for the informal sector, those that are supposed tom pay about US$30 per month, talk about the toll fees where now you have an option to pay in US dollars, increase in the fuel import duty.

“In a country where we are talking about currency stability, we don’t expect price hikes, what we expect is stability but the budget is not giving us that.

“So I think that is the major challenge.

“We were given by the right hand and we had the left hand take everything back.

“We talk about the tax bands being widened to $10 000 but our poverty datum line is at $19 000.

“So, it is a question of how far the Minister has gone in cushioning households and have them above the poverty datum line.”

She concluded that the poor will bear the brunt of the new tax measures.

Labour and Economic Development Research Institute of Zimbabwe (LEDRIZ) economist Prosper Chitambara said spending on social services remains low.

He said spending on education had declined marginally despite an increase in allocation towards health.

“Some of my expectations that were not met were with respect to allocations towards critical social expenditures like health for example.

“Yes, there has been an improvement in health allocation from around 10.1 percent to around 13 percent but we are still below the Abuja declaration target at 15 percent.

“For education it’s the same thing, in fact in education there has been a slight decline from around 13.3 percent this year to 13.1 percent for next year.

“Social protection there has been a significant decline from about 0.7 percent to about 0.4 percent.

“For water and sanitation, it’s the same thing.”

 He said, however, the budget does have clear targets with regards to employment targets.

“We saw the Minister mainstreaming the NDS1 – issues of employment and issues of poverty reduction.

“Also coming up with clear employment targets, clear poverty reduction targets and that is positive.

“We have also seen now the thrust in terms of financing, I think we are going more and more towards domestic resource mobilisation.

“If you look at the tax reforms that the Minister is proposing, I think they are aimed at ensuring that at least we rely more on our own domestically generated resources.”

Speaking separately Confederation of Zimbabwe Retailers president, Denford Mutashu described the blueprint as a mixed bag which does not address issues affecting business.

“It’s a mixed bag. That health got the biggest chunk was expected owing to the continued fight against Covid-19.

“The issue concerning Value Added Tax  on rice was not attempted, surprisingly, yet it is a matter bedevilling business as ZIMRA piles pressure demanding payments backdated to 2017 despite businesses having not collected anything due to policy confusion on the matter,” he said.

He said the ramping up of the tax-free threshold by the minister was an attempt to stimulate aggregate demand which is depressed due to inflation hovering above 450%.

“The country should therefore focus on poverty eradication, realistic employment creation targets, import substitution anchored on a robust export strategy,” he said.

Economist Persistence Gwanyanya said: “There is no link between the projected to what will drive it.

“Stability is just there as a foundation, but it cannot form a springboard to accelerate the desired growth single-handedly.

“Currently, indications are that the economy does not have enough investment to match the growth projections.”

He added: ““The budget is failing to outline exactly how the growth will be funded and as a result, it appears there will be more reliance on domestic sources of capital like taxation of the citizens.”

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