Mthuli Ncube squeezes taxpayers

Finance, Economic Development and Investment Promotion Minister, Mthuli Ncube, yesterday unveiled a set of new taxes aimed at bolstering government revenue in the 2025 national budget. The tax measures, set to take effect from January 1, 2025, target a wide range of sectors, including sports betting, fast food, and plastic waste, in a move to meet growing national needs.

Presenting the ZiG276.4 billion budget at the New Parliament Building in Mt Hampden, Ncube detailed the new taxation framework, which includes a 10% withholding tax on sports betting winnings. The tax will apply to both in-house and online sports betting managed by land-based bookmakers, marking a significant shift in the country's approach to taxing the gambling sector. Ncube explained that while betting shops already pay a 3% tax on gross takings, punters themselves had not been taxed on their winnings.

In addition to the sports betting tax, the minister proposed a 0.5% tax on fast food sales, aimed at addressing rising health concerns related to the consumption of highly processed foods. The tax, which will apply to items such as burgers, hot dogs, shawarma, French fries, and similar fast foods, seeks to curb obesity and related non-communicable diseases by encouraging responsible consumption.

Further, Ncube introduced a 20% plastic carrier bag tax as part of efforts to reduce plastic waste and promote biodegradable packaging. He also proposed an exemption from withholding tax for supplies of recyclable plastics, provided they do not exceed US$5,000 in a year.

In a bid to promote investment, Ncube made adjustments to tax breaks for special economic zones, removing the five-year tax holiday for investors. Instead, a 15% corporate income tax rate will apply, striking a balance between attracting investment and ensuring contributions to the national fiscus.

One significant change was the reduction of the sugar tax on cordials, a move that followed lobbying by beverage manufacturers. The tax on cordials will be lowered to US$0.0005 per gram of sugar, aligning it more closely with the tax rate on ready-to-drink beverages. This move aims to create a level playing field between the two sectors, which had faced imbalances due to the higher sugar content in concentrated cordials.

On energy, Ncube introduced measures to tackle the country's ongoing power crisis. He announced that liquefied petroleum gas (LPG) would be exempt from value-added tax (VAT) to reduce the cost of alternative energy sources, especially as Zimbabwe struggles with rolling power cuts. Ncube pointed out that LPG had become a vital energy source for cooking and heating during outages, helping to alleviate the impact of deforestation and indoor air pollution associated with traditional fuels.

While there were no immediate relief measures for the power crisis, Ncube revealed plans to increase the budget for energy projects, with a focus on improving power generation, transmission, and distribution networks. Key projects include the refurbishment of Hwange's Unit 5 and the development of new projects in the mining sector, which will help ease pressure on the national grid. Additionally, Ncube outlined plans to establish 100 mini-solar grids next year, funded by China.

As the government continues to face fiscal pressures, Ncube acknowledged the strain on public finances, particularly in funding salaries. He disclosed that salaries for 2025 would account for 56.4% of revenue, exceeding the government's target of keeping salaries below 50%. To address this, the government will implement revenue enhancement measures while freezing recruitment, except in critical sectors like health and education.

Despite the additional taxes and measures aimed at increasing revenue, many critics argue that the tax burden on citizens is growing heavier, with concerns that the new taxes will further strain an already struggling population. However, Ncube remains optimistic that these fiscal changes will help sustain the country's economic recovery and development.