Local businesses have castigated the current tax regime for stifling the growth of local companies while calling on the fiscal authorities to put in place a pro-growth tax measures in the upcoming 2021 National Budget, 263Chat Business reports.
This came out during a virtual meeting on the State of the economy this morning where captains of business and industry lamented the stagnation of the local economy due to lack of provisions to foster business growth.
Confederations of Zimbabwe Industries (CZI) president, Henry Ruzvidzo urged government to review its tax system in the forthcoming fiscal statement and make it less straining for local companies.
“We propose a tax system that is pro-growth because 2030 is just around the corner and we need to start to grow the economy,” said Ruzvidzo.
Already the local economy is poised to shrink by 4.5 percent this year but despite authorities projecting a 7.5 percent growth in 2021, much of that growth will depend on a review of the tax burden on companies given that business is trying to recover from a devastating Covid-19 pandemic.
Of notable concern to business, is the exorbitant 2 percent- Intermediary Money Transfer Tax (IMMT) which came into effect in 2018, as the country embarked on a two year-Transitional Stabilization Program (TSP).
But with the TSP coming to an end next month government is seemingly eager to continue charging a 2 percent tax on electronic transactions after having extended it on transactions done in electronic American dollars (USD) recently.
“We are one of the few countries that tax people for transacting. Taxing transactions is very negative from an economic point of view. We saw that government extended IMTT on foreign currency transactions in the mid-term budget but initially it had come as a timed transaction that was meant to serve the purpose of dealing with black market activities but it is now a permanent feature,” SMEs Association founder, Farai Mutambanangwe said.
He added that the development has led to a situation whereby businesses are shifting towards cash –based transactions to evade being taxed.
“Having the IMTT plus bank charges makes it impossible for SMEs to grow,” said Mutambanengwe.
Analysts have also castigated government for failing to put in place tax-sensitive interventions during the height of the Covid-19 pandemic to ease the weight on the already struggling businesses.
Sectors such as mining remain heavily taxed in multiple forms and this has had a damning effect on companies’ returns.
However government finances remain strained at a time traditional revenue streams have been dwindling due to closure of businesses pushing authorities to pass the burden on to the tax payer.
