By Kelvin Kasiwulaya
City of Gweru councilors in their 697th full council meeting made a resolution to scrap 15% of value-added tax on their 2023 budget arguing that the tax increment was unscrupulously added to the local authority’s budget without due diligence and consultation.
The resolution comes at a time when councilors were accusing the city’s finance department of not exercising due diligence by failing to immaculately calculate and include value-added tax ( VAT) within the price tag of the recently approved US$37 million budget.
Speaking during a full council meeting held recently at Townhouse, Gweru Mayor Hamutendi Kombayi said the 15 percent value added tax increment on the approved US$37 million budget was unscrupulous and hence needed scrapping.
“We discussed this issue, and we cannot allow this to happen, we defended a budget, tax included, then now we are told that there is another 15 percent increase on the same budget, it’s unheard of, why should we burden the ratepayers,” he said.
In support of Mayor Kombayi’s sentiments, Cllr Farai Muza said a tax increase on top of the approved budget was unscrupulous and unjustified.
“Fellow Councilors, your Worship, this 15 percent tax is unjustified let’s localize the discourse, if you go into a shop today and you see a product with a price tag of US$5 and then you go to the till and the till operator tells you that the product is $5 plus tax, is that possible, is that logical, I wonder and ponder. This exemplifies what is happening to us, your worship,” said Councilor Farai Muza.
Also in support, councilor Albert Chirau vehemently proposed the adoption of a resolution that would scrap the 15 percent VAT increment on the 2023 budget, the proposition was seconded by councilor Notal Dzika.
However, an economic expert within the City of Gweru who chose anonymity said, the abrupt scrapping of the 15% VAT will cause a 15 percent deficit in the 37 million budget.
We have to understand one thing, scrapping the 15 percent VAT will create a budget deficit of the same, hence we are biting our own hands.
“When a budget deficit is identified, current expenses exceed the amount of income received through standard operations. To correct the city’s budget deficit, a local authority may cut back on certain expenditures or increase revenue-generating activities. A budget deficit can lead to higher levels of borrowing, higher interest payments, and low reinvestment, which will result in lower revenue during the following year.
The opposite of a budget deficit is a budget surplus. When a surplus occurs, revenue exceeds current expenses and results in excess funds that can be further allocated. When the inflows equal the outflows, the budget is considered balanced,” said the expert.# The Sun