The continued backlash against the “2% (or 2 cents) per dollar transacted” tax has cast the new Finance Minister in a bad light. One way Professor Mthuli Ncube has tamed the anger of people is by retracting the blanket application of the tax from charging 2 cents for every dollar transacted to starting to apply the tax to transactions of over $10. Thus transactions below $10 will not be charged this tax.
Despite this change, many people still harbour the strongest ill feelings towards the tax. But relax, the tax might get reduced according to the Professor Ncube. He said;
The 2% tax is necessary. We need to be pragmatic. We need to stop the bleeding. We need to take the pain… People don’t realize that they are already paying for a weak economy. This (2% tax) is one way we can fix our problems. The tax might be fine-tuned in the next budget
That’s it, you have to wait till December this year (when the next budget will be presented) to find out if you will get any reprieve from giving the government every 2cents of your dollar transaction (for transactions over $10).
While we wait, what do (simple) economics say about taxes?
Taxation reduces the purchasing power of the people and it reduces their consumption. The decline in consumption leads to decrease in effective demand for the goods and services, which in turn affects the production of these commodities. Ultimately, the reduction in consumption leads to a reduction in employment opportunities. Frightened? There’s no need to freak out because the 2 cents per Dollar tax is bearable and won’t affect people to reduce their consumption altogether.
Incidentally, things like this tax are what foreign investors look at before committing their money, they would want to know the purchasing power of any country.