On November 25, the Minister of Finance, Dr Mthuli Ncube released the national budget for 2022. There weren’t many surprises and everything went as we expected. As a result, this budget hasn’t sparked much conversation and hasn’t even trended on Twitter. However, a small snippet of a new tax managed to do the trick.

600. Mr. Chairman, while imported mobile phones
attract modest customs duties of 25%, funds made,
however, report the evasion of tariffs due to the
nature of objects which can be easily concealed.

601. In order to fight against tax evasion, I propose to introduce a levy
of US $ 50 which will be collected before the registration of new
cellular handsets by mobile network providers.

602. However, where the duties would have been paid, Zimbabwe
The tax administration will refund the levy, within 30
days after receipt of payment from the mobile network operator.

When the minister presented his budget, the entire 2022 budget was under embargo until he completed his presentation. The document that we got after the embargo was lifted was not the full document, but now we have the full document.

Now that we have everything we need, we need to discuss paragraphs 600 to 602. Three short paragraphs that caused so much rage.

Paragraph 600: a 25% duty is modest?

Give governments a millimeter and they take a kilometer. The Ministry of Finance under Mthuli Ncube is innovative when it comes to finding new ways to impose ourselves. Now we hear the man himself saying that the 25% duty on phones is “modest.” Modest? It means it’s too little for him. This man thinks we should be taxed to death.

What annoys me personally is that in practice it’s not even 25%. It is rather 40%, as for other goods. I should know, I paid the 40% earlier this year. Is it any wonder that people hide their phones to avoid paying this exorbitant tax?

He’s going to make me sound like an old man reminiscing about the good old days, but I can’t help but think of the GNU years when the electronics tax was abolished entirely. This is when the “decent cell phone penetration” really started. This was when most Zimbos first dabbled in smartphones when the devices became accessible. As a result, our mobile phone penetration has skyrocketed.

Where would e-commerce be? All of our WhatsApp and Facebook group merchants would have fewer customers to serve. Where would mobile money be? How would banks have gone paperless when customers did not have the devices to use mobile banking?

I guess we shouldn’t be surprised anymore that Mthuli Ncube is aggressive when it comes to his tax regime. The 2% IMTT is proof that he doesn’t care unfairly, taxing us hard, as long as he can brag that we’ve exceeded our revenue goals.

Captains of industry decried it would be double taxation and would inflate the cost of goods. In turn, inflating the prices paid by end users. Mthuli replied that the tax had turned long-lasting budget deficits into surpluses and so it would stay. So it is clear that for him, these are budget surpluses at all costs.

Section 601: $ 50 tax on each new phone

Now that’s the real shock. Before even looking at what that entails, the fact that this is where the minds of the finance department have drifted speaks volumes. A colleague used the adjective “evil” to refer to this movement. I am inclined to agree that this is a pretty apt descriptor.

We just talked about the ridiculous 2% IMTT. Well, compared to the $ 50 fee, 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 phone for $ 50 and the government would still want that to be $ 50 off, which would result in a 100% tax. If you got a good deal on a budget Android phone for less than $ 50, you’d pay more tax than the phone. Ridiculous.

We wonder if they have thought about it.

It is not clear from the wording of the budget how this would work in practice. I imagine it would just be that mobile network operators would have to prevent devices that have not been used on their network before from working. Econet, NetOne and Telecel can know which device you are using, so it shouldn’t be difficult to comply with the new directive.

When you insert an Econet SIM card into your phone, the phone should communicate with them so that they know which bands it supports, whether it supports 3G, 4G or 5G and serves it accordingly. This allows them to get the IMEI, serial number and manufacturer of the device. So they could just maintain a database of devices on their network, which they probably already do.

This means that when a device that has never been on their network is detected, they simply suspend the service until the user proves that they have paid the fee for the device. For this to work, mobile network operators would have to share device information in a central database. Thus, if it is simply a case where the user changes SIM card, the user is not refused service.

Paragraph 602 would be moot.

Therefore, the little that ZIMRA reimburses people for their US $ 50 would not be necessary. Only those who cannot prove that they have paid fees would pay. However, in theory, we could have people paying the $ 50 just to get a service before they find the documentation proving that they have paid a fee.

As to the legality of this company working on the assumption that a device has been smuggled, I see no obstacle. It is perfectly normal for them to say that we will assume that you are a smuggler and charge you $ 50 which we will refund to you once you prove that you have paid your rights. This is basically how withholding tax works, you have to pay a tax that you can be refunded if you prove that you are in good standing with the tax authorities.

The question that concerns me is whether we are going to ignore all devices currently in use. Are we all going to have to prove that the devices we are currently using entered the country legally? Could we all be kicked out by MNOs until we visited the nearest carrier stores with tariff documents for our 5 year old phones? Or maybe our account balances are deducted with $ 50 of airtime instead? Sounds ridiculous, but with Mthuli it’s not beyond the realm of possibility.

More income improvement measures

The paragraphs discussed above fall under the heading “Income Improvement Measures”. There are other metrics under this heading and most of them you won’t like.

  1. Duties on cigarettes – from 20% + US $ 5.00 / 1000 cigarettes to 25% + US $ 5.00 / 1000 cigarettes [Okay, you might not care about this one, depending on the business you’re in.]
  2. Energy drink tax – all Red Bull, Monster and Dragon drinkers are bracing for a price hike. Mthuli wants 0.05 USD / liter of energy drink to enter the sacred lands of the Madzimbahwe.
  3. Withholding tax – up to 10% to 30%. It’s a big deal and Mthuli knows it. He says the 10% is too low and does not induce compliance. I believe the 30% will encourage compliance, you had better get your business in order with the tax authorities and get your tax clearance.
  4. Auto Insurance Pool – Short term insurance providers are also crazy about. When foreign cars enter Zimbabwe they are forced to take out term insurance and apparently very few end up claiming anything. The pool is distributed to insurers but now 20% of the redistribution will go to the government to be used to help accident victims.

And that’s all. The government takes its tax revenues seriously and we had better get used to it. It doesn’t matter what effects high taxation might have on struggling individuals and businesses in the economy. The government knows best how to redistribute these tax revenues to defend economic growth.

You can download the full document below:

Fast NetOne, Econet and Telecel airtime recharge

Source link

About The Author

Related Posts