UN urges tax reforms

HARARE - Zimbabwe must introduce tax reforms as a way of promoting investment, enhancing inclusive growth and poverty reduction, the United Nations has said.

The United Nations resident coordinator, Bishow Parajuli, last week said one of the concerns the international organisation has on Zimbabwe was inadequate public and private investments.

“Zimbabwe has introduced structural reforms and policies to attract both domestic and foreign investments. However, higher taxes, high cost of doing business and negative perceptions as well inconsistency in communicating policies keep away local and foreign investors,” he said.

Parajuli, who is also the United Nations Development Programme resident coordinator, added that it was imperative for the country to have a conducive investment climate not only to attract foreign investment but also to promote domestic investment.

“A conducive policy environment is also important in attracting money from the Zimbabwe Diaspora as it is in many developing countries including Ethiopia Indonesia, the Philippines, Nepal and Sri Lanka.

“An incentive mechanism including duty and tax free concessions for Zimbabwean expats working abroad, could be considered for harnessing over $3,5 billion worth of remittances a year,” he said.

Parajuli noted that reduction in risks and making clear and transparent policies could also help strengthen domestic savings which could provide an impetus to domestic investment.

This comes as pressure on Zimbabwe — one of the most taxed nations in the world — has been mounting to reduce taxes and promote foreign direct investment inflows and new enterprises.

Speaker of Parliament Jacob Mudenda recently said there was urgent need to review and streamline the numerous taxes applicable to business and investment, as the current tax regime has been overtaken by global events.

Addressing Members of Parliament at a pre-budget seminar in Harare, the Speaker said too many tax obligations affected the growth of the economy.

“There is taxation here, taxation there, there is need for mainstreaming of all taxes,” he said, adding that “one of the ways of growing the cake is to realign our taxation system . . . it is very archaic.”

Zimbabwe’s tax regime is considered as one of the most difficult and expensive, with the country ranked 142 out of 189 countries on the ease of paying taxes in the World Bank’s Doing Business two years ago.

In a review of Zimbabwe’s tax regime last year Ernst & Young said the tax system has not kept pace with the “dynamic business environment, pointing out that the favourable tax rates are negatively impacted by an inefficient tax administration process”.

Government was advised to consider incentives such as tax holidays of up to 100 percent of profits for investment in key infrastructure development and investment in special economic zones.

However, the Zimbabwe Revenue Authority commissioner general Gershom Pasi said offering tax incentives to foreign companies was tantamount to surrendering the country’s taxing rights and would negatively impact on socio-economic development.

“For Africa we want to say come, you do not pay any taxes, do everything you can, go away and we remain poor because when we give them tax incentives we are not only giving relief to the company but also transferring our taxing rights as a country to the country of origin of that company,” he said.

Zimbabwe’s cash-strapped government recently introduced a raft of tax measures, including removing traveller’s rebates and taxing airtime, in an effort to boost its fast-depleting revenue base caused by massive company closures and retrenchments.  
 

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