adminMartin Kadzere Senior Business Reporter
THE Confederation of Zimbabwe Industries says higher taxes and penalties for late payments are some of the major contributors to uncompetitiveness of local products and expects “some form of reduction” in the 2016 National Budget to be presented at the end of this month. The industrial lobby group also called for speedy reforms of parastatals, saying transforming the State-owned firms into profitable entities was critical for economic turnaround.
“Taxation is a main concern,” said Mr Moyo.
“While 15 percent VAT (Value Added Tax) is producing a big chunk of revenue to Government, we feel it is a bit on the high side (given the current environment). The 100 percent penalty for late payment of taxes is also too high. We would like to see taxes coming down to eliminate price distortions.
“Prices of local goods will ultimately go down and this will boost domestic demand.” “The more we buy locally, the more companies increase capacity and more jobs are created.” He also urged consumers to embrace local products, saying while most of the imported goods were cheaper, some of them were harmful and expose customers to health risks.
However, some economic analysts say while tax reduction may be necessary, the impact would be very insignificant as it will not compensate the depreciation of the South African rand against the dollar and other micro-economic factors like cost drivers such as electricity.
“Our central problem is lack of productivity and structural rigidities in areas of supply of key utilities and enablers like electricity,” economist Dr Gift Mugano said in an interview.
“My humble submission is that the national budget must look at providing incentives to encourage business linkages and value chain support together with cluster development initiatives. Such incentives can be corporate tax reduction. This will provide direct benefit to participating companies like Delta, Pannar and Seed Co without necessarily harming the fiscus as it will get more revenue from the multiplier effect of VAT.
“Business linkages will unlock funding to all players in various sectors. This will raise their productivity and competitiveness in a more effective way. “In the same way, there is need to put in place punitive measures such as harsh taxes for non-complying companies. For this to happen, first we must promulgate the local content law as South Africa did in 2012 where it is compelling all 75 percent of businesses trade within South Africa.”
On parastatal reforms, Mr Moyo said the exercise was long overdue and Government should provide adequate resources to ensure they become self-reliant as opposed to the current situation whereby most of the entities are getting support from the fiscus. “State enterprises are critical enablers of the economy, for example Zesa and the National Railways of Zimbabwe,” said Mr Moyo.
“So when the Minister announces his budget, we expect him to allocate enough resources for parastatal so that they cannot continue to be a drain to the fiscus.” In 2010, Cabinet approved reforms of state enterprises, starting with 10, but nothing much has been achieved. This has created a lot of skepticism over prospects for real reforms.
Zimbabwe has more than 70 state enterprises, which once contributed 40 percent to the national GDP. As such, the scope for efficiency of the sector to drive the growth is immense. Further, parastatals and State enterprises fill in the void of essential service and or products by venturing in territories too risky or unattractive to investors yet essential.
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