“High Zim taxes scare away investors”

HARARE - Zimbabwe's high taxes and a cocktail of statutory levies are pushing investors away from the country’s energy sector, Parliament has warned.

Parliamentary portfolio committee on Energy chairperson Nomsa Mhlanga on Tuesday told the National Assembly that mandatory levies being imposed by statutory bodies such as the Environmental Management Agency (Ema) had to be reduced or deferred.

“The committee observed that most potential investors in the energy sector are being scared away by a number of statutory fees that the investors are required to pay… For example, the Hwange expansion project, Ema requires fees to the tune of about $22 million,” she said.

The committee also noted that the country’s taxes were too high, compared to neighbouring countries in the region, so most investors then opted for other countries in the region shunning Zimbabwe.

“The committee therefore recommends that large and national projects which have the capacity to solve the energy problems be exempted from paying these fees or the fees are significantly reduced.

“Another option would be to defer the payment of the fees to a later time when the investor would have started operating and have re-occupied a large part of the capital outlay,” Mhlanga said.

However, civil society and economic analysts have cautioned against tax exemptions being given to investors, saying they are “unnecessary”

The African Forum and Network on Debt Development (Afrodad), recently released a paper highlighting that tax incentives to foreign investors were constricting fiscal space.

In its Draft Research Report on the Cost of Investment Incentives in Zimbabwe Afrodad said presently, the exemptions being granted to investors were hurting the country economically.

“Based on the Zimbabwe Revenue Authority (Zimra) third quarter performance report, total revenue forgone in respect of incentives amounts to $233,1 million.

“This is two percent of the GDP, 6,5 percent of the total revenue for 2015, and 98 percent of the projected capital expenditure budget for 2015,” the Afrodad report said.

The report notes that what is key in luring Foreign Direct Investment (FDI) into the country was not necessarily the tax exemptions, but policy clarity and consistence.

While the Zimbabwe Investment Authority (Zia) chairman Nigel Chanakira is on record saying the country processed investment proposals worth $3 billion in the first nine months of the year, analysts say not all these translate into actual investment.

The United Nations Conference on Trade and Development (Unctad) latest report shows that FDI into the country surged 36 percent to $545 million in 2014 from $400 million registered in 2013.

This comes as Zimra commissioner general Gershom Pasi recently said Zimbabwe should think twice before granting foreign companies tax incentives because this might benefit the countries of origin of the companies rather than Zimbabwe.

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