Mthuli Ncube wins first round on 2 percent tax


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Finance Minister Mthuli Ncube has won the first round on his two cents per dollar transaction tax which some claim sparked the current economic crisis which has seen the electronic dollar and the bond note collapse against the United States dollar and prices of commodities skyrocket.

The country has also been hit by a crippling fuel shortage which the Ministry of Energy has tried to explain in vain.

Ncube was taken to court by an activist Mfundo Mlilo who argued through his lawyer Tendai Biti that the tax was unlawful because the minister purported to change a section of an Act of Parliament which in itself was unconstitutional as he should have tabled a Bill in Parliament first.

Mlilo also argued that the tax was irrational because the government has been excessively borrowing and was now turning to citizens to cover up for its expenditure.

Mlilo wanted the case to be heard as an urgent matter but High Court judge Justice Felistus Chatukuta dismissed the case asking why Mlilo took two weeks to file his application.

“The perception by the applicant that the tax is illegal is not a basis for urgency. The matter is not urgent and is accordingly removed from the urgent chamber application roll,” the judge ruled.

Ncube denied that the two percent tax was responsible for the price hikes in the market.

“It’s not because of the two percent,” he told the Daily News on Sunday yesterday.

“Two percent is two cents in a dollar, how does that double the price of anything? Just think through that. It cannot be two percent, so it’s something else.

“What it is really is the impact of the FCA introduction, which caused the impression in the market that we have two types of currencies, a domestic currency and a foreign currency.

“Then if it’s a domestic currency, then what’s its value? And then we get this parallel market rate shoot up to 1:6-7 and until we said no, people listen, this is too much chaos, the conversion rate is 1:1 through a statement and that brought a little bit of sanity.

“So, it was not the two percent, it can’t be. In fact, there is confusion, I really want to clarify that, it’s not the two percent, how can a two percent cause a more than 100 percent increase in prices, what’s the maths behind that? It’s not possible.

“It’s a perception about value, so it’s an exchange rate issue, that’s what it is and when we said its 1:1, it brought sanity to the market.

“We did not reverse the two percent, so how then did the parallel market move without me reversing the two percent?

“I am just over-dwelling on the point so that people know that it is not the two percent and I want to correct this out there that this is not the case.”

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The Insider

The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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