eBusiness Weekly
. . . IMF maps way forward
Business Writer
Most Zimbabweans do not believe Government is using taxes for the well-being of its citizens, a policy paper prepared by an international think tank, Afrobarometer recently, reveals.
The report surveyed 31 countries and Zimbabwe ranked second-to-last, with just above 30 percent of citizens believing their tax money goes towards their well-being.
Findings from the survey revealed in 2022, show that citizens generally believe Government does not usually use tax revenues for the well-being of citizens.
Only about three in 10 (31 percent) assert that Government uses tax for the well-being of citizens, while almost half (46 percent) disagree and 23 percent say they “do not know”.
“About seven out of 10 citizens (69 percent) say it is difficult to find out how the government uses tax revenues,” reads the report in part.
The report also reveals that about two-thirds (64 percent) of Zimbabweans insist on some degree of accountability for how tax revenues are used, saying that Parliament should ensure that the President explains to it on a regular basis how the government spends taxpayers’ money.
“Close to two-thirds (64 percent) say Parliament should hold the President accountable for how the government spends taxpayers’ money,” reads the report in part.
Demand for accountability regarding the use of taxpayers’ money is stronger among urbanites (70 percent) than rural residents (60 percent) and among men (67 percent) than women.
Citizens experiencing high lived poverty are more likely to demand accountability (73 percent) than their better-off counterparts (58 percent-62 percent).
Trigrams Investments analyst, Walter Mandeya, said coming second from last on such a critical survey is evidence of the challenges policy makers have in communication.
“The challenge is that they are not communicating effectively, clearly or in a simple enough language.
This allows uninformed and misinformed voices to fill in the information vacuum that is created when policy announcements are made, implemented and later reviewed.
“The recent Monetary Policy Statement is a great example of how State information departments failed to adequately communicate key aspects of the policy giving room to massive misinformation. Fiscal and indeed monetary policies are important components of the relationship between citizens and their government and should be carefully managed through robustly transparent communication,” said Mandeya.
While the reasons for this skepticism are not explained in the study, the International Monetary Fund (IMF) offers recommendations for rebuilding trust.
In its latest report titled; “Cutting Budget Deficits in Sub-Saharan Africa without Undermining Development”, the IMF says effective strategies to build public trust around fiscal consolidation plans, such as using compensatory measures (including targeted transfers) or adequate sequencing, are essential to ensure a successful and durable implementation of these adjustments.
The IMF emphasises the importance of clear communication. They suggest explaining the dangers of high deficits and debt, highlighting examples of countries facing economic crises due to poor financial management. Additionally, they recommend outlining the benefits of responsible spending, such as continued access to public services and investments in essential infrastructure.
“Policymakers should explain the benefits of sustainable fiscal policies in terms of continuous access to public services or investments in essential public goods,” reads part of the IMF report.
Transparency is also crucial. The public needs to understand how increased tax revenue will be used, with a focus on reducing deficits while maintaining or expanding social programmes over time.
Introducing compensatory measures, which provide immediate and salient benefits to the most vulnerable, is also important for getting political buy-in, the IMF suggested.
“Such measures could comprise targeted cash transfers to alleviate the effects of fiscal tightening on the most vulnerable or other visible policies such as reductions in public school or health-related fees,” said the IMF.
The global lender also suggests careful sequencing of reforms.
“If possible, more politically difficult reforms (such as the removal of large energy subsidies) should be undertaken when economic conditions are relatively favourable,” IMF suggested.
Alternatively, reforms could initially target higher income groups, such as focusing on eliminating subsidies for luxury goods.
Ultimately, public trust hinges on the government’s ability to manage finances efficiently, fairly and transparently.
The IMF says public acceptance of fiscal adjustment depends on the ability of policymakers to convince the population that the government will manage public finances in an efficient, fair and transparent manner.
The IMF calls for institutional reforms to improve public financial management, including ensuring value for money in investments and stronger governance around public spending.
“This notably means improving the management of public investment, for instance by ensuring “value for money” in the selection of investment projects and stronger governance rules around public procurement,” the IMF said.
On the revenue side, strengthening tax collection and administration, while ensuring the wealthy pay their fair share, can also increase trust and bolster domestic revenue.
