BY BUSINESS WRITER
THE Confederation of Zimbabwe Industries (CZI) says government must review policy free thresholds upwards and increase civil service salaries in the upcoming 2022 national budget to boost consumer spending.
Companies have grappled with subdued demand since the Covid-19 pandemic exploded in 2020, leading to firm closures and up to 500 000 job losses, according to World Bank statistics.
“Industry needs a spending population to thrive; hence the 2022 national budget should prioritise increasing the spending power of the population,” it said.
“In addition to the general need to review upwards civil servants’ salaries, widening the Pay As You Earn tax bands and increasing the tax-free threshold will help create more disposable incomes for the workers.
“Prioritising social safety nets will also help ensure that the vulnerable population can at least afford some basic needs, which industry would help meet.”
The government has not reviewed the tax free threshold pegged at US$10 000 in November last year, although basic commodity costs have been increasing.
“Increasing taxes can actually reduce tax revenue due to reduction in compliance,” CZI added.
“The 2022 national budget should start laying the foundation for increasing the tax base.
“Zimbabwe tax statues are old and have evolved over the years into a very complex and at times contradictory tax code.
“This makes tax compliance difficult and complex for business.”
It escalated it’s push for state assisted bailout packages to stem a blazing crisis precipitated by the Covid-19 pandemic, a deteriorating foreign currency crisis and general economic mismanagement.
CZI warned that in the absence of such injections, current turbulences would be difficult to address, affecting growth projections.
In its paper titled 2022 Budget Statement Issues from Industry, which was released as Zimbabwe battled to forestall a runaway parallel market exchange, which has sparked confrontations between government and business, the CZI said such packages would have to be carefully guarded to avoid plunder.
Prolonged de-industrialisation intensified following the Covid-19 outbreak last year.
But the crisis deteriorated further after the foreign currency auction system ran into problems, starving industries of crucial forex inflows for raw material and equipment imports.
Under the hyped National Development Strategy 1 (NDS1), the Ministry of Finance said it was towards rebuilding value chains that were disrupted as the pandemic hit economies.
“Although the NDS1 has identified priority value chains, there are deep and imbedded challenges, which require stimulation to kick-start,” the CZI said.
“The 2022 budget should begin to commit resources to industrialisation, specifically by coming up with a resource envelope which value chain players can tap into to pursue industrialisation.
“Mechanisms can be put in place to ensure that the resources are accessible only for ring-fenced uses, with limited possibilities of diversion.”