'Govt must not rely on private sector'

HARARE - Government must rein in its expenditure and stop relying on the depressed private sector, feedback from a recently held parliamentary post-budget meeting indicated.

This comes as Finance minister Patrick Chinamasa recently presented a $4,1 billion 2015 National Budget, in which he said 81 percent of the funds will go towards recurrent expenditure, particularly the civil service wage bill.

Brains Muchemwa, an economist, told parliamentarians at the meeting that while private companies had to honour tax obligations, the bigger problem was government’s failure to contain its expenditure.

“Zimbabwe is a country in denial, on the other hand we have a government that does not want to limit its expenditure expectations and on the other reluctance and denial by the private sector to pay taxes,” he said.

“This on its own indicates we need a major policy change as regards to tax. Blame has been levelled on the Zimbabwe Revenue Authority (Zimra) as responsible for company closures but it is important to note Zimra is not operating on its own,” he added.

Muchemwa also said government had to outline benefits of imposed taxes in value terms as the transacting public was in the dark concerning the benefits of certain taxes levied.

“The system is not a healthy one, what we need is full disclosure and for government to curb its spending and for the private companies not to choose which taxes to pay and when to pay them,” he said.

Rameck Masaire, a tax expert with auditing firm Ernst and Young, added that numerous tax reforms being levied were not going to save the liquidity-constrained country.

“All these tax measures need to be supported by other major issues probably around clarity in policies, for example the indigenisation policy. We still have a problem and tax reforms will not do much, what is needed is more from the executive arm of government,” he said.

Early this year, the Gershem Pasi-led Zimra descended on companies defaulting on their tax obligations, imposing garnishee orders on their bank accounts.

Of these defaulting companies, over 10 have dragged the taxman to the Fiscal Court of Appeal over the orders.

Despite some companies voluntarily disclosing their arrears to the tax collector and proposing payment plans, they were not spared the garnishee orders.

Recently, Pasi said garnishee orders were only used as a “last resort” for “truant and noncompliant clients”, and was not the modus operandi of Zimra in collecting revenue.

Chinamasa in his budget extended a tax amnesty period to defaulting companies, from six to 15 months.

 

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