Zimbabwe 2009 Mid term Budget offers little reprive for Employees & Companies

The mid term budget presented by The Finance Minister on 16 July 2009 offered little reprive to employees with no downward revisions to the high PAYE. Further, the loan benefit was revised resulting in only US1000 loan amount being nontaxable. One would have expected amounts north of US5000 to ensure employees are cushioned from the high PAYE for those employers with a capacity to offer loans.

The targeted concessions for business were not enough although some reductions in import duty for some specific goods were offered. The government needs to do more to reduce duty while balancing inflows to the fiscus. This will ensure that the cost of production is competitive inorder to ensure companies compete favourably with other cheap imports such as in the clothing industry and meat industry. You need more concessions in the manufacturing sector if we are going to stimulate production and ensure a balance between inflows and outflows of money in the multi currency enviroment. This will ultimately positively impact on tax inflows into the fiscus.

One would not want a relapse of yester year where a farmer getting diesel at a subsidised price from NOCZIM found it easier to sell the diesel than farm.

It seems the budget was driven by representations from the various economic players implying that in future other sectors also need to be heard so that there is a holistic representation of the economic sectors in the budget leaving less room for arbitrage opportunities by fly by night investors.

Otherwise there is a lot of thought in the budget and some worthy revisions such as scrapping of the banking levy for the banking sector to have some relief. Hopefully the banking sector will respond by reducing charges and offering credit! inorder to stimulate production but understandably this will take time as balance sheets of banks need to be enhanced and probably a revision of the credit offering as what was done in South Africa through the National Credit Act. Banks are also cautious in line with the ongoing recession and lessions from the subprime crisis. Improvements in risk management systems of banks is also key in this regard.

Dony Mazingaizo, ACCA has an interest in financial management and IFRS