African governments are grappling with revenue shortfalls exacerbated by covid-19, and have heavily impacted economic status of many countries. From Nigeria, the largest economy in the continent to Burundi, the smallest, wretched government purses is driving a range of policies aimed at increasing revenue generation.
With gross domestic products (GDP) not in par with population growth, many African states have taken to borrowing, multiple taxation and tax increment as means to upset their revenue shortfalls.
Following this trend, Zimbabwe has introduced a raft of new tax measures, including a 5% levy on imported dairy products, a US$50 levy on all new mobile phones, and an increase in sin taxes on tobacco as well as energy drinks, Innovation Village reports.
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The report says Finance Minister Mthuli Ncube is seeking new revenue streams as he nearly doubled the country’s proposed spending in its annual budget this week.
But against government’s push to increase revenue generation through taxation are people crying out from a side of dwindling earnings.
The report said that Zimbabweans have long complained that they are already heavily taxed, while their disposable incomes are shrinking. Labour unions also complain that salaries and wages in Zimbabwe lag behind those of regional peers, even as continued dollarization of the economy and weakness of the local currency drive up the cost of living. It is against this backdrop that the Minister is proposing a raft of tax measures to boost government’s revenue stream in his 2022 budget statement.
Some of the measures – including a 5% levy on dairy product imports – have been criticized for being protectionist against the backdrop of the coming into effect of the Africa Free Continental Trade Area (AfCFTA), the report said.
It also noted that Zimbabwe has also hiked sin taxes, with the excise duty on cigarettes going up from 20% + US$5.00 per 1 000 cigarettes to 25% + US$5.00. A flat excise duty on energy drinks at a rate of US$0.05/litre has also been introduced in the 2022 budget. But where the biggest challenge lies is on mobile phones.
“Other revenue enhancement measures include a new $50 levy on all new smartphones used in Zimbabwe. This is in addition to a 25% customs duty on imported handsets. Ncube said that Zimbabweans have been avoiding this levy through smuggling smartphones into the country,” the report said.
Household average income in Zimbabwe across all provinces range between US$27 and US$45 and US$63 and US$102, according to data published by Zimbabwe Vulnerability Committee (ZimVac). This means the $50 new mobile phone tax has come off as oppressive.
“We just talked about the ridiculous 2% IMTT. Well, compared to the $50 duty, the 2% is the most reasonable tax in the world. The $50 does not take into account the price of the phone being registered. You could buy a $50 phone and the government would still want its $50 cut making for a 100% tax. If you got a bargain for a budget android phone for less than $50, you would pay more in tax than you did for the phone. Ridiculous,” a concerned Zimbabwean said.
The government plans to implement the tax by requiring mobile network operators – including Econet Wireless and NetOne – to collect the $50 levy on each smartphone prior to registration. But that poses a “how would it work?” question that was not answered in the budget. However, the report provided a practical suggestion on how it can be implemented.
It would just be that mobile network operators will have to prevent devices that haven’t been used on their network before from working. Econet, NetOne, and Telecel can tell which device you are using and so it shouldn’t be hard to comply with the new directive.
When you insert an Econet SIM card in your phone, the phone has to communicate with them so that they know which bands it supports, whether it supports 3G, 4G, or 5G, and serve it accordingly. They can get the IMEI, serial number, and device manufacturer this way. So, they could just maintain a database of the devices on their network, something they probably already do.
What this means is that when a device that has never been on their network is detected, they simply withhold service until the user proves they paid duty for the device. For this to work, the mobile network operators would have to share device information in a central database. This is so that if it’s just a case of the user switching sim cards, the user is not denied service.