Mthuli Ncube created Harare Tax?
25 February 2024
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By Agencies- The wealth tax introduced by Finance Minister Mthuli Ncube in the 2024 national budget is now being dubbed the “Harare Tax.” This rebranding comes after the Bulawayo City Council (BCC) disclosed that not a single property within Bulawayo meets the criteria for the wealth tax, highlighting a significant implementation challenge and questioning the tax’s national applicability.

Initially aimed at imposing a 1% levy on non-primary residences valued over US$250,000, with a cap of US$50,000 in tax per property annually, the wealth tax’s objectives are now in jeopardy. The Zimbabwe Revenue Authority (Zimra), tasked with tax collection with assistance from local councils, faces a critical setback with this revelation from Bulawayo, Zimbabwe’s second-largest city.

The BCC’s comprehensive report indicates the highest-valued residential property in the city stands at US$115,000, considerably below the wealth tax threshold. This stark discrepancy between policy intention and local property valuations suggests the tax may only be feasible in Harare, where property values are presumed higher, hence the emerging nickname “Harare Tax.”

Economic experts are casting doubt on the effectiveness of this localized approach. “The so-called Harare Tax highlights a misalignment between the national tax policy and the economic realities outside the capital,” stated a local economist seeking anonymity. “If the wealth tax’s impact is confined to Harare due to higher property values, it severely limits the anticipated revenue stream and questions the tax’s fairness.”

The BCC’s valuation methodology, which assigns uniform values within rating zones for tax purposes, and the absence of a comprehensive property occupancy database, underscore the challenges in identifying eligible properties for taxation under the current law, which spares primary residences.

Critics point out that the financial and logistical burdens of implementing the tax, including the need for significant system adjustments and the potential for legal recovery costs, may dwarf any potential revenue. “Implementing what has effectively become the Harare Tax could introduce inefficiencies and inequities in the tax system, especially if it predominantly affects only one region,” a tax policy analyst remarked.

With Bulawayo’s property valuations unlikely to rise significantly in upcoming assessments, the rebranded “Harare Tax” raises profound questions about the wealth tax’s viability and equitable implementation across Zimbabwe. This situation calls for a critical reassessment of the tax’s objectives, structure, and enforcement mechanisms, ensuring they align with the economic landscapes of all cities, not just the capital.