HARARE: As I continue to discuss options through which the Government of Zimbabwe can fund or finance its infrastructure demands, which as we all agree continue to age due to population growth and decay of current facilities, I have chosen to touch on a sensitive and controversial topic: the country needs a public infrastructure tax. Yes read this article to the end and then make your judgment.
Last week I proposed Local Asset Backed Vehicles (LABVs) and the feedback, especially from local authorities, is encouraging. We are positive that from as early as next year the country could start to witness a roll out of LABVs in certain municipalities.
Just to recap, LABVs are 50/50 public infrastructure investment structures between public entity or entities and private investors. Their attractiveness depends on the potential return; hence some areas like rural areas may not be that attractive. Private investors like LABVs because 50% risk of the projects will remain with government, thus reducing their exposure.
Nonetheless the success of these approaches depends on political manoeuvring and bargaining. Hence there must be real political support and will power and also strict due diligence to vet capacity of the private partner and viability of the whole project.
Now turning to this week’s topic, yes the country needs a public infrastructure tax. The taxes currently levied on Zimbabweans are income tax, PAYE, VAT, withholding taxes, excise duty, special excise duty, capital gains tax, carbon tax, road tolls, surtax, stamp duty, customs duty and presumptive taxes inter alia.
Add to these different levies such as manpower development levy, standards development levy, NSSA and workers’ compensation insurance. This has made the Zimbabwean worker heavily taxed. Nonetheless we need to look at the facts and merits of an infrastructure tax.
Despite Zimbabwe being a sovereign government, sadly it is not the issuer of the currency in use, hence its revenue constraints. Therefore, its major way to fund planned public spending lies in the erection of elaborate tax-harnessing institutional and accounting structures.
I started preparing this article last week and was excited to wake up on Monday to news that government had gazetted a rental and development levy for the resettled farmers with permits and 99-year leases. The five dollar per hectare per year development levy will be used to fund maintenance of roads and other infrastructure in the farming areas. From this, Government can mobilise around $20 million per year.
Some people in our country are of the belief that we don’t have a funding problem but we have more of a spending problem. They argue that if the money being collected by Government was used for what they term good use, then the country could be progressing at a faster rate. However, given the huge national deficits our problems are both of funding and spending nature.
To address the fears of critics of the public infrastructure tax, I am proposing that the Government restructure the tax regime so that the new tax will be accommodated without raising the current level of total taxation. This will have to see some taxes and levies go away or have their rates reduced.
