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Govt’s 2021 spending tight, to tax SMEs

27 Nov, 2020 - 00:11 0 Views
Govt’s 2021 spending tight, to tax SMEs Professor Mthuli Ncube

eBusiness Weekly

Kudzanai Sharara
Government is planning to spend $421 billion next year of which $390,8 billion will come from local resources, Finance and Economic Development Minister Mthuli Ncube said yesterday.

Of the total spend, capital expenditures will constitute $131,6 billion (5,5 percent of GDP), while current expenditures are expected to consume $290 billion (12,1 percent of GDP).

Presenting the 2021 National Budget Statement, Mthuli said the resultant $30,8 billion or 1,3 percent budget deficit will be met through the domestic market.

To finance this debt, Government plans to issue Treasury Bills worth $30,8 billion and Treasury Bonds worth $7,7 billion.

The domestic borrowing plan, which exceeds the actual budget deficit, includes provision for other borrowings related to cash smoothening operations, Mthuli said.

The Finance Minister said, Government, despite receiving total bids higher than the capacity of revenues and borrowings, will still adhere to an expenditure ceiling of $421,6 billion.

To attain the above targets, fiscal policy will continue to prioritise revenue enhancement measures, while pursuing expenditure management thrust initiated from 2018 on the launch of the TSP, reads part of the Budget Statement.

As part of revenue enhancement measures, Government plans to promote industrialisation and overall invigoration of domestic production through strengthening value chains that utilise local raw materials.

The approach is expected to restore and strengthen synergies among sectors, especially the agriculture, mining manufacturing, construction and services sectors, increasing employment opportunities for inclusive growth in the process, reads part of the Budget Statement.

Starting with the 2021 National Budget, the target is to increase agriculture output to US$8,2 billion by 2025 and accordingly, $46,3 billion has been allocated to Ministry of Lands, Agriculture, Water, Climate and Rural Resettlement.

Through the 2021 National Budget, Government total support to agriculture amounts to $46,3 billion, in addition to the $6,1 billion provided under the $18,2 billion Stimulus Package towards stimulating agricultural production.

Further, for the 2020/21 farming season, a contract equivalent to US$253 million has been signed with local banks to support commercial farmers, and Government is providing guarantees on a case by case basis.

In view of the above interventions, agriculture, arguably the largest employer in the country, is projected to grow by 11,3 percent, in 2021.

Industrialisation drive

To support the industrialisation drive, Government plans to continue facilitating access to affordable financing to enable recapitalisation of the industry especially SMEs and emerging new competitive industries.

With the manufacturing sector heavily dependent on the doing business environment to attract investment and also productivity improvement, the 2021 Budget will advance the ease of doing business environment as part of the wider reform agenda under the Integrated Results Based Management system underpinned by the Rapid Results Approach.

Varied revenue measures will also be put in place to support industries. The manufacturing sector is expected to grow by 6,5 percent in 2021.

Mthuli proposed to introduce a fertiliser manufacturers’ rebate, whereby raw materials used in the production process will be imported tax and duty free by approved manufacturers.

In support of the growth and development of the dairy industry, Mthuli proposed to extend duty suspension on milk powder and ring-fenced quantities of raw cheese for the year 2021.

Local bus manufacturers are set to benefit after the ring-fenced facility that allowed the importation of 100 public service buses of a sitting capacity of at least 60 passengers at a reduced customs duty rate of 5 percent was terminated with effect from 31 December 2021. Government will also prioritise the procurement of locally manufactured buses.

To support local production of motor vehicles, line ministries and government departments are now compelled to purchase from local assembly plants.

“Furthermore, Treasury will not accommodate any request for waiver of duty or additional funding for imported motor vehicles.”

Between 2015 and September 2020 about US$1,3 billion was spent on imported buses and light motor vehicles.

Cigarette and spirit manufacturers might, however, feel hard done as new excise duty is now pegged in US dollars.

Cigarette manufacturers, such as BAT Zimbabwe, will now pay an equivalent of US$5 per 1 000 cigarettes plus 20 percent of the ex-factory price while spirits producers such as Afdis will now pay 30 percent plus an equivalent of US$1 per LAA.

Micro and Small Enterprises and informal operators, operating from places such as Gulf Complex and Kwame Mall will now be required to pay a presumptive tax of an equivalent of US$30 per unit per month.

Hairdressers, restaurants, bottle store operators will now also pay a presumptive tax of $2 500 and $10 000 respectively.

Landlords will be responsible for the collection of the above taxes which take effect from January 1, 2021. Failure to collect and remit the tax will be subject to a penalty equivalent to the amount of tax payable and interest.

Further, to tap into this potential, Zimbabwe Revenue Authority will establish a Specialised Unit that focuses on MSMEs during the first quarter of 2021.

In what seems like a carrot to the presumptive tax, collected revenues will be ring fenced and be used to finance construction of MSME operating infrastructure, in partnership with the Infrastructure Development Bank of Zimbabwe.

“Development of this infrastructure will ensure that MSMEs operate in designated places, accessible to tax administrators, thereby enhancing contribution to the Fiscus and reducing health hazards,” reads part of the Budget Statement.

 

 

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