WITHOUT significant legroom and headroom, Finance Minister Mr Patrick Chinamasa today made a determined effort to break the current vicious circle of company closures, falling disposable incomes and illiquid market conditions by making deliberate interventions aimed at boosting demand in the local economy.

(Download the FULL document: 2015 National Budget – Zimbabwe.pdf)

Among some of the provisions made in the 2015 National Budget to stimulate demand, beginning next year, workers earning not more than US$300 will be exempt from paying income tax, while on the overall the tax bands will be widened.

It is hoped that the measure will help improve disposable incomes.

While the US$4,1 billion Budget tries to plug the gap left by the concessions through increasing duties for the tobacco sector, which is performing relatively better than other sectors of the economy, excise duty on clear beer – Government’s cash cow in terms of revenue collections – has been slashed from 45 percent to 40 percent.

Conversely, excise duty on cigarettes was increased from $15 per 1 000 sticks to $20 per 1000 sticks.

A raft of duty free concessions, including rebates on raw material imports for the manufacturing sector, was also extended to try and improve capacity utilisation.

Government expects next year’s exports to climb 5 percent to US$3,83 billion, while imports are expected to drop to US$6,15 billion from an estimated US$8 billion this year.

Worryingly, most of the revenues will be channeled to civil servant salaries, presenting a huge challenge in trying to stimulate production.

BUDGET HIGHLIGHTS AT A GLANCE

• Minister Chinamasa proposes a budget of US$4,1 billion for fiscal year 2015, $3,2 billion will be for employment costs. Only $340 million reserved for capital projects.

• Dormant companies to be exempted from submitting tax returns

• Government to appoint Zinara as an agent for collecting presumptive tax from commuter operators, taxis and driving schools.

• Tax exempt threshold for withholding tax for unregistered producers reviewed to $1000

• Excice duty on clear beer reduced from 45 percent5 to 40 percent and as a quid pro quo alcoholic beverage manufacturers expected to lower prices in order to drive volumes

• Government exempts statutory entities from paying tax on interest earning on investment activities

• Government revises tax-free threshold from $250 to $300 million to create aggregate demand in the economy

• Government to re-introduce tobacco levy on growers to finance reforestration activities

• Government increases excise duty on cigarettes from $15 per 1000 sticks to $20 per 1000 sticks

• Government to compel mining companies to provide to Zimra exploration data, debt/shareholding mix etc

• Government proposes to increase royalties in rough diamonds sold to local firms, licensed to cut, polish the gems, effective Jan 2015

• Lower corporate tax structure for exporting companies proposed. Companies exporting more than 51 percent will be charged 15 percent

• Government reduces customs duty on raw materials for furniture industry

• Government extends duty free importation of powdered milk for use in processing

• Government extends rebate on duty on raw materials for clothing sector for a further 12 months.

• 4 610 companies closed since 2011 affecting more than 55 000 people

• In 2013 231 companies affecting 19 000 companies closed, in 2013 878 companies affecting 14 499 closed, while on 2014 134 companies closed

• Resources to be allocated for feasibility studies for local infrastructural projects

• China Sunlight avails US$55 million for completion of Gwai Shangani Dam

• Rail infrastructure to be rehabilitated

• Women’s Bank to be established in the coming year

• Board of SWF is being set up and Government will allocate resources

• Infrastructure bond issuance of US$140 million approved

• Inflation expected to be low and subdued next year

Download the FULL document: 2015 National Budget – Zimbabwe.pdf