FINANCE minister Mthuli Ncube yesterday presented a $927,3 billion budget with an ambitious gross domestic product growth projection of 5,5% for 2022, but former Finance minister Tendai Biti dismissed it as a “ritualistic formality bereft of substance”.
Biti said the budget had failed to address exchange rate distortions and structural challenges around the free-falling local currency.
In his budget presentation, Ncube said: “Higher than projected wage reviews during the course of 2021 by government and some private sector employers has pushed a number of taxpayers into higher income tax brackets, resulting in bracket creep and a higher tax burden.
“In order to provide relief to taxpayers and also boost aggregate demand for goods and services, I propose to adjust the tax-free threshold from $10 000 to $25 000 and also adjust the tax bands to end at $500 000, above which a marginal tax rate of 40% will apply with effect from January 1, 2022.”
But Biti said the budget was detached from realities on the ground, particularly on exchange rate distortions that have resulted in the ever-increasing costs of goods and services.
“A brave approach was needed to deal with exchange rate distortions and multiple pricing systems. Truth is de-dollarisation has failed dismally. The failure to address the structural issues around currency, the auction rate, deficits, corruption and the debt question makes the budget irrelevant,” Biti said in an analysis of Ncube’s budget.
“That budget presentation was made by a man just going through a ritualistic formality. It was a sordid exercise in mediocrity, mendacity and lackadaisity. A lacklustre and vacuous presentation bereft of substance or form, one totally oblivious to the structural challenges facing Zimbabwe.
“As we argued before, Zimbabwe faces humongous structural challenges which will not be resolved by imposing punitive taxes that punish working people.”
Ncube has repeatedly insisted that he would not dollarise despite pressure from captains of industry and the citizenry.
Zimbabweans had expected the minister to increase the threshold to $50 000 when he presented the mid-term budget review in July.
However, the cost of living has increased to much higher levels than the proposed tax-free threshold.
The Zimbabwe National Statistics Agency (ZimStat) said the November cost of living for a family of five stood at $37 780 per month.
In July, the Confederation of Zimbabwe Retailers said based on the current levels of prices, a tax-free threshold of $50 000 would alleviate poverty for many Zimbabweans.
But the cost of living has rocketed since then, with foreign currency shortages triggering rampaging parallel market exchange rates.
Workers earning Zimbabwe dollar salaries have to buy foreign currency on the parallel market for their daily requirements, yet the rate has been shooting, while their salaries have been stagnant.
Yesterday, ZimStats said the annual inflation rate increased to 58,4% this month, from 54% in October, giving an indication of the hard times ahead.
“I further propose to review the tax-free threshold on income accruing in foreign currency from US$70 to US$100, with effect from January 1, 2022. Other foreign currency tax bands remain unchanged,” Ncube said.
According to the Apex Council of Zimbabwe, the largest civil servants’ union, workers earn between $22 000 and $40 000 on average, while private sector employees earn between $25 000 and $35 000 monthly.
“Our substantive position remains that salaries should be restored to 2018 levels, where the lowest paid civil servant was earning US$475 or thereabout. That is the substantive position,” Apex Council spokesperson David Dzatsunga said yesterday.
“Maybe that may not happen at once, but we prefer a commitment to the restoration of salaries to that level from the start. As long as it (income tax-free threshold) is in Zimbabwe dollars, it is just going to evaporate very quickly, actually so I don’t want to classify it as a measure that can really be celebrated,” he said.
MPs who spoke to NewsDay said they were not convinced the 2022 budget would solve Zimbabwe’s crisis.
Ruth Labode, chairperson of the Parliamentary Portfolio Committee on Health, said the package for the health sector fell short of the national requirements.
“I’m not happy because if you remove COVID-19 funds, the remainder is too little,” she said.
“So I’m urging the minister to look for funds.”
MDC senator Morgen Komichi said more efforts should be made to resolve the health delivery crisis.
“The budget has supported some elements of recovery,” he said.
“The only challenge will be the capacity to disburse the money they have allocated to those ministries, the ability to finance the real activities, we hope that this time they will get to finance it.”
Ncube also announced a review on the tax-free bonus threshold in the 2022 national budget.
“I also propose to review the local currency tax-free bonus threshold from $25 000 to $100 000 and the foreign currency tax-free bonus threshold from US$320 to US$700, with effect from November 1, 2021,” he said, adding that current legislation compelled taxpayers who earn income in foreign currency to pay tax in foreign currency or in proportion to value of earnings in foreign currency.