The tax hikes on fuel and airtime by Finance Minister Patrick Chinamasa though  predictable remains most unfortunate.  Even if ours is a broke government which is caught between a hard place and a rock.

Increasing taxes on key goods and services such as fuel and telecommunications was a no brainer. The priority appears to have been more short term than it is to fix the fundamentals of the economic challenges the country faces.
Reluctant to address the underlying structural economic issues that have brought the economy to this situation, the government has chosen to go down the route of heavy taxation.

This is easy money considering that Zimbabweans have sometimes been described as fairly docile and will not even complain to each other in their homes about this development.  Perhaps it is our resilience that always drives us to find new informal ways to make ends meet.

The reality however is that there is no money in the economy. Any increase in taxes that makes commodities more expensive will have the effect of reducing disposable incomes and consumers simply dropping commodities they may deem luxurious.

What the economy needs is a stimulus and more liquidity to induce consumption that will spur the manufacturing sector. The government should therefore be considering policies that leave consumers with more money in their pockets not the other way round.

This government is not taxing the consumer to fund infrastructure projects .Instead it is doing so to fund its huge wage bill and also its spending on non essentials such as officials’ vehicles and MPs’ allowances.

The consequences of these taxes to the rest of the economy are far reaching. The resultant fuel increase will result in price increases across the board. This economy depends largely on road transport to move people and goods from point to point.

Furthermore these increased fuel costs will have a knock on effect on the costs of production in the manufacturing sector which will trigger price increases of locally made goods.
This will have the add on effect of triggering positive salary adjustment demands by the few remaining formal sector workers, a development that once again raises the spectre of struggling companies closing down..

The taxation measures proposed on the telecommunications sector will also lead to cost cutting measures on the part of the big three telecommunications companies, Econet, Telecel and Netone.

We have already seen how the this sector which is worth an estimated $1, 4 billion has created downstream employment for thousands of Zimbabweans in both the formal and informal sector.

The consumer will talk less and this may have an effect on these companies revenues which in the long run treasury will still tax through Value Added Tax (VAT).

Consumers’ incomes will not rise and they will learn to talk less by buying less airtime or continuing to use the same airtime.

The 25% increase on handsets which is a contradiction to the zero duty on ICT products will further subdue the telecoms sector. It will have a dent on the teledensity penetration rate which will affect economic development. Air time vendors will definitely notice a drop in sales which will affect their own incomes.

What we have is a Minister of Finance who is under pressure to raise money for government at all costs regardless of the ramifications this may have on the greater economy and society.

We have a government that operates on an unhelpful  ‘borrow and spend’ mantra.

After successfully establishing itself as a bad debtor even to friendly nations such as China it has resorted to taxing its citizens to death. As long as the government is taxing its citizens to fund its unrestrained consumptive behaviour, the country must brace itself for more economic hardships.

The government must be wary of killing the goose that lays the golden egg. These taxes could choke the few remaining businesses especially the informal businesses operating in high density areas where there is a perennial power shortage. There could be economic induced public unrest if the government does not revisit its economic policies

Malvern Mkudu writes in his personal capacity. He is available on Malvern.mkudu@yahoo.com