Consumers demand PDL linked tax as costs rocket

By Tatira Zwinoira and Lee Musaidzi and Ashton Ndakusiya | Dec. 6, 2024

Consumers have endured prolonged daily blackouts.

THE Consumer Council of Zimbabwe (CCZ) this week advocated for the minimum income tax threshold to be pegged according to the poverty datum line.

This comes after Treasury increased the threshold to ZiG2 800 in the 2025 National Budget, which Finance Minister Mthuli Ncube presented last week with a total budget of ZiG276,4 billion and expected revenue of ZiG270,3 billion.

The budget introduced various taxes, including a plastic bag and fast foods tax.

However, Treasury did not raise the minimum income tax-free threshold to offset the impact of these new taxes.

Daily power cuts, eroding wages, shrinking disposable incomes due to inflation, rising prices, and unemployment continue to affect consumers.

“The minimum tax threshold should be guided by the poverty datum line. According to the family of six basket for October 2024, the cost of living for a family of six stood at ZiG17 871,71,” CCZ said in response to inquiries by businessdigest.

“In US dollar terms, the basket stood at US$635,33. As such, we are of the view that this should be guiding as a benchmark for the tax threshold at least.”

While CCZ said the budget presented was consumer-oriented, there were some areas to be reviewed.

Keep Reading

“A number of positive measures have been taken to promote a green economy, and also some measures to discourage importation of completed products, but rather import completely knocked down kits (CKDs) thus promoting value addition and creating employment,” CCZ said.

“However, public transport is still a major consumer issue and affects working hours as workers are delayed and also charged high due to lack of public transport. So, the move needs to be reviewed.

“Also, we feel the tax threshold needs to be reviewed further upwards because the current average incomes are below the poverty datum line as indicated by the family of six basket.”

CCZ said more could be done to encourage solar energy usage in the country.

“We had hoped the government would say something with regards to the embracement of ZiG by government departments since ZiG stability is critical to the macroeconomic stability of this economy,” CCZ said.

“Confidence building among consumers, businesses to accept use of ZiG must be a priority because the market is not confident about ZiG and consumers continue to be forced to look for the US dollars, thereby pushing the parallel market rate even higher than what it should be,” CCZ added.

When consumer confidence declines, people tend to spend less, especially on non-essential goods and services, fearing economic uncertainty or future financial strain. This leads to reduced sales and delayed investments.

Lower consumer spending slows overall economic growth, as consumption is a key driver of the economy.

This can create a negative cycle where reduced demand hurts businesses, leading to layoffs and further declines in consumer confidence.

In its post-budget analysis, the Zimbabwe Coalition on Debt and Development (Zimcodd) said social service delivery plays an integral role in Zimbabwe's development agenda.

“The well-being and quality of life of citizens hinge on effective services in key areas such as healthcare, education, water and sanitation, and social protection,” it said.

“These services are pivotal in addressing Zimbabwe's socio-economic challenges and are essential for fostering sustainable development.

“The importance of reliable social service delivery in Zimbabwe cannot be overstated, particularly considering the challenges being experienced in the country, such as economic instability, food insecurity, and a noticeable decline in service quality,” Zimcodd said.

The organisation noted that many Zimbabweans, especially the most vulnerable and marginalised populations, were reliant on inadequate and unreliable social services.

Therefore the CCZ said, the government should prioritise enhancing social service systems to promote human capital development and combat poverty and inequality.

“Zimcodd believes that an examination of the 2025 National Budget allocations towards social service delivery is essential,” it said.

“The 2025 National Budget was presented when the nation battled a tightening macroeconomic environment characterised by frequent local currency fluctuations and incessant inflationary pressures.

“There are some upside risks to the 2025 outlook such as projections of slowing global inflation, bullish global gold price, the balance of risks is tilted to the downside.”

“Consequently, there is a need to increase spending on the social sectors to cushion the vulnerable groups as the nation expedites its reform agenda outlined under the Structured Dialogue Platform for the Arrears Clearance and Debt Resolution Process.”