Prosper Ndlovu, Business Editor
THE Bulawayo City Council (BCC) says the introduction of the two percent transactional tax has become a severe cost burden in its operations given the volume of transactions made by the local authority towards service delivery.
The Intermediated Money Transfer Tax (IMTT), popularly known as the two percent tax, was introduced by Treasury late last year and has become a game changer in terms of boosting Government revenue. Several capital projects including social spending on key subsidies such as public transport, are being bankrolled by funding from this revenue stream, according to Finance Minister, Professor Mthuli Ncube.
However, BCC says the tax unit is chewing into its budget at a time when the local authority is struggling to meet basic delivery service requirements on the back of prevailing inflationary economic conditions.
“The introduction of the two percent Intermediated Money Transfer Tax (IMTT) has increased council costs. The volumes of transactions done by the city makes the tax a very significant expense to council,” said the local authority in its 2020 budget statement presented Monday. It, however, could not indicate how much has been incurred through the two percent taxation.
Council further expressed concern that service providers were continuously increasing their prices in line with the exchange rates and inflationary pressures facing the economy.
“In general, prices of commodities have been increased, notably premixes and quarry used in the road construction as well as water treatment chemicals,” it said.
“Fuel is a big component of service delivery and its continual increments have made it difficult for council to fulfil its service delivery obligations such as attending to sewerage spillages and water bursts, which must be attended to promptly to minimise the negative impact on residents and reduce water losses and save on cost.”
As at June 2019 fuel prices were $7,55 and $7,22 for petrol and diesel respectively before rising to $10.41 and $10.89 respectively as at 16 September 2019. This week fuel prices increased to $11.55 and $12.08 for petrol and diesel respectively.
Citing the negative impact of macro-economic changes and inflation experienced so far this year, the city council has proposed a $2,8 billion budget for 2020 with rates expected to spike 400 percent. In the meantime, the local authority has also proposed a $507 million supplementary budget in which ratepayers will fork out 300 percent more in tariffs, if Government approves the move.
Inflation has picked up since January 2019 where it was recorded at 56 percent and by June 2019 it had sharply risen to 175.66 percent. In view of these conditions, council said suppliers of water chemicals and other raw materials were now pegging their prices in line with the rising inflation, thereby making it difficult to estimate the costs.
“Council is, therefore, exposed to a lot of risks such as litigation for failing to settle debts on time, high production costs as suppliers price their products based on either the parallel market rate or the ruling rate in banking institutions. This development adversely affects service delivery,” said council.