Imposing taxes without consent “a recipe” for social unrest

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  • “The American Revolution was born of a tax revolt”
  • Cabinet on Tuesday considered and approved that starting March 2020, a monthly contribution of 2.5% of the total remuneration shall be deducted from every Government employee
  • The fee, according to the Government, will go to a state savings fund
  • Where the local currency continue to lose value against the US dollar, the logic of enforcing additional tax burden on hard-pressed civil servants becomes questionable

In the years leading to the American Revolution, lived a man by the name James Otis – a prominent lawyer and political activist. He coined a rallying cry of “taxation without representation is tyranny!” which became the watchdog of the American Revolution against the British Government in the 1960s.

In short, the American Revolution was born of a tax revolt. Likewise, a study of the French Revolution also shows that the taxation regime in the 18th century was a significant source of revolutionary grievances. The nature of the tax regime was described as excessive, inefficient and unfair.

To date, the issue of taxes classifies as one of the hotly contested discussions in relation to governance and policy implementation.

Four decades after gaining independence from the British colonial rule, Zimbabwe finds itself stuck in a deep socio-economic and political crisis.

The country’s economic decay accelerated during the rule of the late former President Robert Mugabe. He was eventually forced out of office through a November 2017 coup which elevated former Vice President Emmerson Mnangagwa to the presidency.

The current Government’s tenure has however been marred by introduction of contentious policy frameworks, security services crack down on protestors, civil unrest, spilling inflation and a generally worsening economic meltdown. As a result, hopes of economic recovery are fast diminishing although Government insists that the economy is heading in the right direction.

At its 4th meeting of the current year on Tuesday, Cabinet considered and approved that starting March 2020, a monthly contribution of 2.5% of the total remuneration shall be deducted from every Government employee in consultation with the Public Service Commission.

The fee, according to the Government, will go to a state savings fund.

“Cabinet resolved that the government employs the Mutual Savings Fund and that it be established by March 2020, that government will immediately provide a lump-sum injection of $100 million from the budget to facilitate the expedited establishment of this fund,” Finance Minister Professor Mthuli Ncube said.

Zimbabwe’s issue with taxation under the current political regime dates back to the time when Professor Ncube introduced a controversial 2% transaction tax in 2018 (SI 205/2018).

The Minister has since boasted that the country is realising billions of revenue through the tax which he says is being used to finance development projects.

The Zimbabwe Revenue Authority (ZIMRA) reported a 1396.73% growth in intermediated money transfer tax (IMTT) in 2019 to ZWL$2.7 billion compared to the same period the prior year, as the economy relies on electronic payments.

In September 2019, High Court Judge Justice Happius Zhou ruled that the 2% tax was illegal but the ruling only served as a highlight of the contention surrounding its introduction. The tax was not lifted since it has already been passed in Parliament through the Finance Act authorising the 2019 budget.

With the introduction of the additional 2.5% tax to already hard pressed civil servants, Government said the move is meant to protect the workers from loan sharks, but the issue sparks a different angle of discussion.

There is rarely a savings culture among the civil servants whose incomes are eroded due to lower income levels against the skyrocketing inflation. Despite calls by some Labour Unions for members to be paid in US dollars, Government has insisted on the legality of the SI 142/2019 which banned the use of multi-currencies.

Given the background, where the local currency continue to lose value against the US dollar, the logic of enforcing additional tax burden becomes questionable. Workers have been reduced to mere consumers as the local currency seize to be a store of value due to the exchange rate depreciation.

Recently, the African Development Bank (AfDB) highlighted the lack of “policy coordination” under the President Emmerson Mnangagwa led administration which is hampering economic progress.

As history entails with reference to the American and French Revolutions, unfavourable tax regimes triggers social unrest and ultimately revolutions. If government is sincere about its reform agenda, there is need for consultations to ensure consent in policy implementation.

Equity Axis News

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