Industry calls for tax incentives

HARARE - Zimbabwe must introduce tax breaks to emerging companies as a way of boosting the country’s economic growth, a leading industrial body has said.

Zimbabwe National Chamber of Commerce (ZNCC) tax expert Tendai Mavhima told delegates attending a pre-budget seminar yesterday hosted by the ZNCC, that small-to-medium enterprises, start-up businesses and corporates require tax incentives to increase production.

“We understand that government is badly in need of revenue, but if they can give SMEs five-year tax holidays or preferential rates,  this will not only result in increased number of new companies, but also increased demand for goods and services as employees will have more disposable incomes,” he said.

Mavhima added that government would be able to receive more revenue through value added tax, income tax and pay-as-you-earn (Paye) from a vibrant industry.

This comes as Zimbabwe — one of the most taxed nations on earth with almost 95 percent of government’s  income coming from taxes — is eager to boost economic growth through new, foreign and domestic investment.

The country’s economy has been cooling down since 2013 due to external factors such as sluggish global growth and weak commodity prices and internal factors that include a disputed Zanu PF election victory, liquidity crisis and a high interest rate environment.

Finance minister Patrick Chinamasa recently revised the country’s economic growth for this year from 3,2 percent to 1,5 percent, while the World Bank has slashed Zimbabwe’s economic growth prospect from 2,8 percent to 1,0 percent.

The decline in economic activity in the country — caused by massive company closures, high unemployment rate and policy inconsistencies among others — has seen  government missing its revenue target for the half-year to June 2015, with the revenue authority blaming the poor performance on a “myriad of challenges”.

Revenue for the period under review amounted to $1,6 billion against a target of $1,7 billion, resulting in a negative variance of six percent. Net collections declined by three from the same period last year, during which $1,7 billion was collected.

In the period under review, individual tax collections of $379,5 million were 12 percent lower than the $429,5 million collected for the same period last year.

Corporate income tax was 15 percent lower than the prior year on the back of the depressed economic environment, which has negatively affected the profitability of companies.

Value added tax was 33 percent short of target, with Zimra attributing the subdued performance to low disposable income in the hands of consumers.

There was also a 65 percent decline in mining royalties to $39,8 million as a result of depressed international prices and lower sales.

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