THE Zimbabwe National Chamber of Commerce (ZNCC) is lobbying the government to reform the country’s tax system as multiple layers of statutory obligations remain a nagging headache for business.
Critics say Zimbabwe has multiple layers which have often been blamed for high cases of tax avoidance and evasion by some individuals and companies.
The taxes, experts say, have also pushed up the cost of production, making the southern African nation less competitive than its regional peers.
Finance minister Mthuli Ncube is this month expected to present the 2024 National Budget at a time commodity prices remained subdued on the global market.
In its pre-budget submissions to Treasury, the ZNCC said issues that were not attended to in the previous budget included those relating to value-added tax (VAT) payments and the intermediate money transfer tax (IMTT).
“The government is the biggest consumer in our economy. Once a business issues an invoice to the government, settlements are made in about 6 months or even more and businesses are compelled to pay VAT regardless of the payment being received or not,” the ZNCC says.
“The current set-up is that a fiscal tax invoice should be issued within 30 days of supply and on/before the 25th of every month VAT returns should be submitted. However, in some cases, payment will not have been received by then.
“VAT payments should be made on the actual cash received by the business and not on an invoice basis. Also, the VAT burden should not be on businesses except to collect the VAT on behalf of the Government. Turnover tax is being used as an avenue in other countries and it can be used also as an option by Zimra.”
Turning to IMTT, the ZNCC says when 2% the tax was introduced, the spirit of the tax was to bring into taxation the informal sector which was not being taxed.
“What it has done, however, is to overly tax the formal taxpayers. Businesses are incurring the IMTT even when paying tax dues to Zimra, thus it is a tax on tax,” the ZNCC says.
“To cushion the supply chain players against the increased cost of production, the cost is passed on to the consumer in the form of price increases across all goods.
“IMTT is not tax deductible. Its application has to be different between businesses and consumers. The burden of the IMTT tax is huge on business and, therefore, the Chamber proposes that the Ministry of Finance and Economic Development should allow the IMTT to be tax deductible and it should be removed when remitting tax to Zimra.”
The business lobby group also asked the government to periodically review the tax-exempt transactions in local currency whenever the domestic currency loses value.
“When the IMTT was introduced, the value of the tax-exempt transactions was at most US$10. In the 2022 Mid-term Budget Statement, the Honourable Minister proposed to increase the value of tax-exempt transactions from ZW$1 000 to ZW$2 500,” the ZNCC says.
“As the exchange rate continues to depreciate and to cushion the 44% of Zimbabweans languishing in poverty, it is ideal to upward review the value of tax-exempt transactions to at most US$20 and align this to the exchange rate movement to stimulate aggregate demand in the economy by reducing the effect of the IMTT on disposable incomes. This should be replicated for corporates.”