PROF MOYO'S TAKE ON WEALTH TAX

With the high level of misinformation and disinformation from people who have apparently not even read the budget speech, whose ranks sadly include Honourable Members of Parliament, it would be useful if business and industry practitioners, and especially academics – particularly but not only economists, political economists and business administration specialists – at the country’s universities and colleges stand up to be counted to critically analyse the budget and share their professional insights with the public on through multiple media platforms, including these streets.

Given the huge and understandable interest in the proposed so-called “Wealth Tax”, whose link with “wealth” is neither self-evident nor obvious, this is what Minister Ncube actually said about it:

“Wealth Tax

155. Mr Speaker Sir, the key fundamental of tax policy is to address the regressivity of tax that occurs when individuals in a low-income category pay a higher percentage of their income as compared to individuals in higher income brackets. Consequently, the tax incidences fall disproportionately on the low-income groups resulting in inequality.

156. In order to ensure that every person contributes to the Fiscus in line with their levels of income, I propose to introduce a Wealth Tax levied at a rate of 1% of market values of residential properties with a minimum value of US$100 000.

157. Resources derived from the levy will be ring-fenced towards urban infrastructure development, in particular roads, water, sewer and community health centres.

158. Principal Private Residential properties owned by elderly persons above 70 years will, however, be exempt from the tax”.

COMMENT:

It’s hard to see how this is a “wealth tax”.

Also, the notion that a roof over the heads of one’s household or family is “wealth”, or “income” is problematic and not sustainable in a country like Zimbabwe.

For the overwhelming majority of Zimbabweans, housing is a basic human need, and it is one that the state in has failed to meet since 1980.

For example, the much touted “Housing for all by 2000”, ended up as a pipedream.

The state ought to be in the business of assisting Zimbabweans to have a roof over their heads.

It is wrong for the state, at this juncture in the development of the country, to preoccupy itself with taxing the few Zimbabweans who have struggled to put a roof over the heads of their families to finance “urban infrastructure development, in particular roads, water, sewer and community health centres”.

This is very problematic, on too many fronts to enumerate, for now, save to emphasize that the state must not lose sight of the existential fact that in a developing country like Zimbabwe, housing is a basic human need, which has remained elusive for the majority of the population.

Perhaps the scenario would be different, if the proposed ‘wealth tax” would exclude the principal private residential property of a house owner, and would therefore be only levied on additional residential properties that are used for rental, real estate or other commercial purposes.

Last but not least, the notion that there is anything objectively or scientifically called “market values of residential properties” in Zimbabwe is fanciful, thumb sucking proposition.

There’s just no such a thing.

The residential property market in Zimbabwe is a seller’s enterprise, which is a hive of untold corruption.

While well intentioned, the proposed "wealth tax" levied at a rate of 1% of market values of residential properties with a minimum value of US$100 000 would amount to an unintended but assured invitation to massive corruption.

As a concept, a “wealth tax” is of course ideal, but it is an idea whose time in Zimbabwe has not yet come, not least because the country remains a sea of poverty where the definition of wealth is yet to be established, and where the state has not fulfilled its promise to provide housing for all! Prof Jonathan Moyo was writing on X

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