Chinamasa must do a balancing act

HARARE - Fiance minister Patrick Chinamasa has once again been presented with a unique opportunity to revive the economy with strong policies that may give a new impetus to the country’s ailing industry when he presents the 2016 National Budget today.

Although Chinamasa is faced with a Herculean task of pacifying competing stakeholders in sharing drawn down national finances, we want to urge him to reduce a plethora of taxes currently being imposed on individuals and companies in an effort to stimulate production and encourage entrepreneurship.

As it stands, most companies are folding down while many are stillborn due to an unsustainable tax regime that sucks corporates dry.

Zimbabwe is one of the most taxed nations on earth and over the years, government has been refusing to implement tax reforms aimed at attracting foreign direct investment.

The country’s tax regime is considered 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.

As such, there is an 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.

In an effort to promote economic growth and reduce chronic poverty levels in the country, government must 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.

While we understand that Chinamasa is circled by multiplicity of challenges, chief being on how to clear the staggering $1,8 billon the country owes to multilateral creditors at a time when tax revenue streams are declining due to the shrinking formal economy, the Treasury boss must come up with a smart way of taxing corporates without stifling their growth.

A balancing act would be imperative to meet the demanding task of helping an expanding population of 13 million people, 70 percent of them in hardship, and rolling in the dollars into Treasury to avoid a “shutdown”.

Chinamasa’s borrowing options are limited by multifaceted factors including a high sovereign risk triggered by the $10 billion foreign debt, a domestic banking system struggling for capital and poor relations between Zimbabwe and the donor community.

To circumvent this challenge, the Finance minister must come up with new economic policies that may stimulate the injection of foreign capital into the ailing economy.

Post a comment

Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
- Editor

Your email address will not be shared.