Finance Minister Discusses Why The 2% Tax Was Introduced

Finance minister, Mthuli Ncube (MN), last Thursday was interviewed by Alpha Media Holdings (AMH) chairman, Trevor Ncube (TN), on the forum In Conversation with Trevor. During that interview, the minister spoke about his reaction to his appointment, the policies rolled out by his ministry so far and what lies ahead. Below are excerpts from the interview.

TN: Share with us, you have been unpopular for the 2% tax, some people call you Mr 2%, let’s deal with this 2%, that’s bold, that’s brave.

MN: I thought to myself, here is an economy which probably got the highest level of electronic money, probably overtaken by Kenya, that’s one before the RTGS dollar; number two, I have a deficit; number three, I have three and a half billion dollars, which has been collected by corporates, but not remitted to treasury.

What happened is that my predecessor had to approach the central bank and was using the central bank window to the tune of $3 billion, so that’s an additional debt as well; four, there is a huge informal sector, the economy has been informalised.

So how do I get the informal sector on board to pay their dues, and I thought the best is to use some tax based on the usage of electronic money. I get 100% compliance, everyone pays, you only don’t pay, if we say don’t pay.

Some people have been saying, minister, given that this works so well, why don’t you reduce other taxes and increase this one. I have been thinking about it.

TN: And what are you thinking about that?

MN: You know what, it’s very attractive and in my next budget I’m even mulling over that.

TN: So are you promising these guys tax reduction in certain areas?

MN: You know what they say, you must never announce policy in an interview. So I’m not promising them anything, but I am thinking about it, I am getting the compliance I need.

TN: Let’s deal with the insensitivity of the 2% where people are saying, yes, we see what you are trying to do, but you are hurting the people out in Siyaso and that kind of stuff, what’s your response to that?

MN: Well, maybe we have to see how we adjust our exemptions, it’s about exemptions, and we said that anyone with a transaction of about $10 and below should not pay a tax, clearly that has to be raised given the rate of inflation.

It’s not that we are insensitive, but actually, it’s an inclusive tax, to that extent we don’t want those that are not advantaged like you to pay, they shouldn’t be paying at all.

TN: So we now have a lot of exemptions, is that an ideal space to be in?

MN: I think so, I would say there needs to be some fine-tuning, there is one issue I may remove on exemptions in the budget, so there is still six months to think about it.

More: The Standard


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Mthuli Ncube

Professor Mthuli Ncube is the Minister of Finance and Economic Development.He was the Chief Economist and Vice President of the African Development Bank ,financial, economics, investment, and public policy expert, entrepreneur and academic. Professor Ncube divides his time between the private sector in Switzerland and... Read More About Mthuli Ncube

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