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Minister Ncube's 2% tax caused 16% economic decline - austerity for pain's sake, no gain

15 Feb 2019 at 09:45hrs | Views
"Finance minister Professor Mthuli Ncube introduced the 2% per every dollar transaction tax in October last year as part of his "austerity for posterity" measures in a development which saw him receiving heavy criticism from all sections of Zimbabwe," reported The Zimbabwean.

"Total payments in the economy declined by 16% in November 2018, as the effects of the 2% started hitting on spending, from the Reserve bank can show."

If Zimbabwe was a health and functioning democratic country in which those in power are accountable to the electorate then alarm bell will be ringing as loud as church bells in all government departments.

There is no doubt that the 2% tax has cause serious economic hardships especially amongst the country's poorest, those living on US$30 per month in a country whose breadline is US$650 per month. Now it seems the 2% tax may well has backfired for Minister Ncibe and government too.

If financial transactions have declined by 16% is this possible that economic activity has also declined by 16%?  This has serious ramifications on the whole nation; a slowing down economy impact negatively on economic growth and recovery, reduced volume of sells will mean reduced profits, government's earning from sales tax will fall because of reduced takings, etc.

So whatever addition money government has collected from the 2% levy on electronic transaction must now be carefully weighted again what government has lost in income tax, sales tax , poll charges, etc. as a result of the 16% slowing down of economic activities.

Government must monitor the economy very closely to make sure the economic activities pick up because a sustained 16% slow down in the economy will be a disaster for the nation.

The 2% tax was billed as "austerity for prosperity" but now it may will turn out to be "austerity for pain's sake all round". Not that it will be a surprise, ever since the late Bernard Chidzero first introduced his WB sponsored Economic Structural Adjustment Programme in 1990, the nation has been told to endure economic hardships for a better tomorrow.  For the last 38 years the Zimbabwe economic has followed a steady trajectory of decline, the Zanu PF "better tomorrow" has been always been mirage.

"The introduction of mobile money was a relief to the poor households. However, the introduction of this 2% tax will affect these people and the problems of inequality are thus made worse," concluded The Zimbabwean

Even if the 2% tax was to prove to be an ill-advised and even down-right foolish move that caused untold misery and deaths – there are millions of people are so poor one decent meal a day, medicine and many other life's essentials are now a luxury – to the people and no additional revenue for government; we can be certain this Zanu PF will never admit it made a blunder. Never! It is not in the DNA of corrupt and tyrannical regime to admit to making a mistake much less apologise.

Whilst Zimbabwe remain a pariah state ruled by corrupt and tyrannical thugs there is always the chance of the nation pursuing voodoo economic policies for years and even decades because policies are imposed on the nation with no serious scrutiny which only a health and functional democracy can provide. If we are serious about meaningful economic recovery then we must demand democratic change in Zimbabwe with the sense of purpose the matter demands. 

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