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
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.