Legislators Slam Mthuli Ncube’s US$30 Barber Tax

_Mthuli Ncube, who revealed he pays US$20 per haircut and US$60 monthly at a Borrowdale salon, acknowledged that the US$30 tax might be steep for some operators but argues it is a “fair average” based on typical costs._

HARARE — Finance Minister, Mthuli Ncube, has acceded to a call by legislators for the reduction of presumptive tax on barber shops and hair salons but has extended the tax bracket for the informal sector to include beauty parlours, fitness centres and butchery operators.

The fuel industry will continue to be allowed to sell in foreign currency to allow it to replenish its products given the shortage of hard currency on the market, Ncube said on Friday in the National Assembly during debate on the Finance Amendment Bill which seeks to give legal effect to the various fiscal measures he announced during the mid-term fiscal policy review in July.

There was a heated debate on presumptive tax on salons and barber shops which Prof Ncube had pegged around US$30 per chair, with legislators saying the money was too high.

Legislators from the political divide were unanimous that the proposed revised monthly US$30 per chair was too high for hair salons and barber shops and proposed that it be reduced to around US$10, after an initial proposal of US$300.

They argued that if the tax became too high there would be no compliance as barbers and hair salons would advertise digitally and visit clients at their homes as was the case during the Covid-19 induced lockdowns.

But Ncube said his experience had shown that many people were spending money on hair-dos.

“I do accept that salons vary in size. For instance, where I go in Borrowdale, I cut my hair thrice a month and I pay $20 for a haircut. That is what I do. So, per month I pay $60 as one individual but I am not the only one, it is a big salon. Some are small, so it is possible that $30 may be too high, but then we would have to go deeper to really try to differentiate according to size. It gets very complex. So, being a presumptive tax, we just came up with a figure that we thought on average would be affordable but there is no reason why these cannot be reviewed in future,” Ncube said.

Buhera West Member of Parliament, Tafadzwa Mugwadi (Zanu PF), argued that it was not prudent to impose taxes which legislators could not afford given their meagre salaries.

“I am doing a comparative analysis, which means those who run salons get more than what Members of Parliament get. It does not augur well that the tax being paid by barbers is more than what an MP is getting . . . So for now, instead of wasting a lot of time, the tax for hairdressers and barbers should come back to US$5,” said Mugwadi before Ncube concurred and the House adopted it.

Ncube said his objective was to reduce presumptive tax for several businesses to ensure compliance but added other businesses into the tax bracket.

“In order to provide relief to taxpayers, thereby enhancing tax compliance, Government made necessary adjustments to presumptive tax. These Clauses 6, 10 and 12 seek to revise downwards the presumptive taxes and broaden the tax base to include beauty parlours, fitness centres and butchery operators,” he said.

Ncube said in future, Treasury will consider whether to put additional businesses in the presumptive tax bracket.

Commenting on the call by Members of Parliament to direct service stations to sell fuel in ZiG, Ncube said for now it was difficult to do so given the foreign exchange situation in the market.

“This is a good suggestion. Because of the shortage of foreign currency, in terms of its availability in the system for availing foreign currency, the inter-bank system, we will not be able to provide enough foreign currency for the sector hence we said you can sell in United States dollars and harness the foreign currency that you need for re-imports or imports from the market,” he said.

“So, we allowed for the sale of fuel in United States dollars. We continue to examine this issue to see whether we can recommend otherwise but for now, that is a policy which has enabled us to manage our situation with this forex constraint issue. We do have a roadmap in terms of the use of the USD and overtime we will be able to make appropriate announcements”. _*— Herald with edits*_