Chronicle Editor
Sikhulekelani Moyo, Business Reporter
Treasury should ease the tax burden on businesses and individuals in the forthcoming 2023 National Budget so as to reduce the cost of doing business and enhance consumer purchasing power.
This should also be buttressed by enhanced policy consistency, which promotes investor confidence and macro-economic stability.
These issues were raised by stakeholders in Bulawayo during a pre-national budget consultative meeting organised by the Zimbabwe National Chamber of Commerce (ZNCC) Matabeleland Chamber last Thursday.
In a presentation on taxation and its implication on development, economic consultant, Dr Peter Mgodi, said the tax framework was a burden to many formal businesses as Government seeks to maximise revenue collection with the dominant informal sector contributing little or nothing to the fiscus.
For example, Dr Mgodi said the Intermediate Money Transfer Tax (IMTT), commonly known as two cents tax on electronic transactions, was a double taxation to businesses and individuals who are already paying income tax and other taxes.
“Some of the issues include VAT withholding tax, which is also an impediment to cashflow. The law on VAT withholding tax was meant for errant business but now is being applied to all,” said Dr Mgodi.
In a bid to stabilise the economy, reduce inflation and shore up the Zimbabwe dollar, the Government in May this year announced a cocktail of measures including doubling of IMTT on transfer of foreign currency from two percent to four percent.
The levy on withdrawal of foreign currency was increased from five cents per transaction to two percent of the amount withdrawn. Such measures, said Dr Mgodi, were biased towards maximising revenue rather than being fair on the part of consumers and tend to frustrate spending.
“There turns to be bias in implementation of tax laws. For example, the issue of paying VAT in foreign currency where people are being denied input tax, which has been incurred in local currency to generate foreign currency,” he said.
During plenary session, business representatives concurred with Dr Mgodi saying the tax component was discouraging many depositors from keeping their money in banks, which threatens the viability of the financial services sector and increases demand for hard cash.
“Government should build confidence in the banking sector through reducing tax because people are now using hard cash transactions, which also impose risks of being robbed,” said one of the participants.
Others expressed concern over short-interval policy shifts, which affect how businesses plan their operations and tends to promote uncertainty. The meeting made reference to the numerous statutory instruments which they said end up confusing businesses.
“One of the biggest challenges we have is policy inconsistency and policy loopholes as there is constant change of policies. One Statutory Instrument is put today, two weeks or three weeks later, another is put in place,” said one of the participants.
The participants said such inconsistencies affect businesses’ planning because businesses work on a long-term plans and as such policies should run for five to 10 years.
ZNCC Matabeleland vice president, Mr Louis Herbet said as Bulawayo industries are trying to get back on their feet, there was a need for the budget to address the issue of cost drivers and unlock more funding from banks.
“Bulawayo industries are trying very hard but we lack financial support to retool and expand operations,” said Mr Herbet.
Other participants suggested that Government introduces a Covid-19 tax holiday to allow affected companies to fully recover and be able to sustain their businesses.
They also lobbied for an increase in import duty for selected products to avert an influx of cheap imports that threaten viability of local businesses. – @SikhulekelaniM1
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