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Last year in his 2024 national budget, Finance, Economic Development and Investment Promotion minister, Professor Mthuli Ncube introduced a wealth tax whereby any owner of a property valued at a minimum of US$100 000 is subject to 1% tax. It is however expected to increase the cost of living for both the rich and poor.
With 2024 already in full swing Professor Mthuli’s tax on the wealthy will be an annual charge to be paid over a 12-month period.By targeting the so called super rich through his imposition of the 1% tax, the cost of living in Zimbabwean dollar terms is expected to continue to increase throughout the outlook period, mainly driven by rising official and parallel market exchange rates.
“The US dollar price increases for some goods and services are also likely, driven partly by anticipated production and transport cost increases,” a report confirmed this development.
“Due to relatively lower prices than formal retail shops, the informal retail sector will likely remain the preferred source of basic food and other commodities, especially among poor households. Panic-buying of staple grain will trigger significantly above-normal price spikes through the next harvests.”
The local currency is currently trading at US$1: ZWL$10 900 against the greenback on the parallel market and US$1: ZWL$6 104 on the official market.
The country’s Chancellor of the Exchequer also known as Minister of Finance, Economic Development and Investment Promotion proposed his “wealth tax” that targets the country’s super-rich with an intention to use the funds earned from the new measure to upgrade urban infrastructure.
Whilst presenting the 2024 national budget statement to Parliament, and also commenting on the sidelines of a Confederation of Zimbabwe Industries CZI breakfast responding to his 2024 budget presentation, Ncube said the current tax structure was benefiting the rich at the expense of those who earned less.
Ncube said the tax policy is aimed at redressing the fact that individuals in a low-income category paid a higher percentage of their income compared to individuals in higher income brackets.
As a result of the old tax policy, “the tax incidences fall disproportionately on the low-income groups resulting in inequality,” Ncube said.
“In order to ensure that every person contributes to the fiscus in line with their levels of income, I propose to introduce a wealth tax at a rate of 1 percent of the market values of residential properties with a minimum value of 100,000 U.S. dollars,” Ncube said.
“Resources derived from the levy will be used for urban infrastructure development, in particular roads, water, sewage and community health centers,” the Professor added.
Good news for the elderly is that Senior citizens will however be exempted from the new tax, and the principal private properties owned by elderly persons above the age of 70 years would be spared, the minister said.
It is widely believed many of the country’s rich people own more than one residential property as a store of value and also accrue income from rentals.
Ncube even laughed it off stating, “Mu Zimbabwe vanhu vanoti Havana mari (Zimbabweans cry they do not have money) yet they send their children to the most expensive schools overseas,” and Ncube’s Assertion feeds to Zimbabwe National Statistics Agency’s (Zimstats) latest results on the food poverty datum line as of December last year showing a 22% increase from the previous month.
“In the 2024 national budget presentation in early December, the government reintroduced duties on selected basic food and other commodities that had been exempted from import duty in April 2023 when the government tried to stem high basic commodity prices and shortages.
“Additional taxes in the 2024 budget statement are expected to drive price increases for food and other non-food commodities in 2024. The government also regulated that only registered and tax-compliant informal sector retailers can procure goods from producers and wholesalers,” noted reports that argue Ncube’s wealth tax will open a can worm of disasters on prices affecting both the rich and not so rich.
The Professor announced a ZWL$58,2 trillion budget for 2024, projecting a domestic economic growth of 3,5% next year.
According to the Finance, Economic Development and Investment Promotion minister, this growth would be backed by a raft of new tax increases in fuel and a sugar levy among others including his wealth tax now in effect in the new year.
“Due to lower prices than formal retailers, the informal sector has increasingly become the preferred source of food and non-food items, especially for poor households. The demand for grain on the market is increasing in deficit- producing areas as own-produced stocks are depleted
“However, market availability of staple grains is reducing, with most markets in deficit areas without grain as farmers with surplus stocks speculatively withhold supplies,” a report emphasized this.
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