Finance minister Kenneth Matambo on Monday announced a raft of amendments to the tax regime in what analysts said will help stimulate economic growth.
Matambo said the Value Added Tax Act would be amended to exempt all farming equipment and all basic foodstuffs, which are currently zero rated, saying the move will encourage healthy intake of a balanced meal and improve agricultural output. Analysts hailed the move as a strategy to encourage farmers and promote self-sufficiency.
The finance ministry increased VAT registration threshold for small businesses from P500 000 to P1 million in order to relieve small business taxpayers of the burden of regularly filling in tax returns. He said his ministry would also present to parliament amendments to the Transfer Duty Act, meant to encourage first time homeowners. Matambo forecast a budget surplus in his P50.1 billion budget. Secretary for Economic Affairs in the Ministry of Finance, Dr. Taufila Nyamadzabo said after the budget speech that if achieved, government will use the P1.326 billion surplus to cushion reserves which currently stand at P67.6 billion. “The modest surplus will build our reserves,” Dr. Nyamadzabo pointed out.
Customs and Excise contributed 31.8 percent to the budget, followed by non-mineral revenue (VAT and income tax) at 31.2 percent or P15.66 billion, while the mineral revenue came third at P15.25 billion or 30 percent to the budget. Matambo said the non-mining sector proved to be resilient during the economic crisis and has surpassed the mineral sector, reflecting weak demand in the advanced and emerging economies. The minister said the economy is expected to grow at a modest 5.1 percent buoyed by strong construction and factory activities, among others. He said inflation has been on a decline from 7.4 percent in December 2012 to 4.1 percent in December 2013, signaling stable food and commodity prices.
“The lower inflation reflects the base effect of the increase in some administered prices in 2012 as well as general slowdown in price increases in 2013 for the restaurant, hotels and transport,” Matambo said. He could, however not be drawn into discussing salary hike of public servant saying the Bargaining Council will meet and negotiate the issue with government.