Huge volume of investments flowing into the country is not commensurate with revenues the Fiscus is recording, a situation that is worrying, according to the Zimbabwe Investment and Development Agency (ZIDA).
ZIDA is the Government’s investment promotion agency, responsible for facilitating domestic and foreign investment in the country and last week raised an alarm that there is a need for authorities to relook at laws regulating investment and taxation.
The agency signed a collaboration agreement with the Zimbabwe Revenue Authority (ZIMRA) last week aimed at improving investor-related services and the integration of electronic systems.
ZIMRA is the Government’s revenue collection agency, mandated to assess and collect revenue, facilitate trade and travel, and enforce the payment of taxes, levies, royalties and duties for the country.
ZIDA chief executive Tafadzwa Chinamo, said the collaborative agreement involves the exchange of information, real-time processing of investor-related issues, finding and implementing solutions to enhance the ease of doing business and facilitating investments.
However, in his remarks he noted: “But more importantly, worryingly, we speak of all these investment numbers coming, but the Fiscus is not recording commensurate revenue from that.”
He added that the recording part is that as investors come in, they were made aware of their tax obligations but along the value chain revenues recorded were not impressive.
“Some of them may be out of ignorance, and even those annual returns tax certificates are the things we want investors to comply with without too much hustle,” said Chinamo.
In terms of investor-related services, the parties shall collaborate and exchange information on investor-related services, including queries on taxation and tax registration services for companies and the tax treatment of expatriate employees.
The integration of electronic systems will ensure collaboration on ease of doing business through the integration of the parties’ electronic systems (e-systems) to be identified to ensure real-time logging in of investor information and processing of issues that affect the promotion, protection and facilitation of investments in the country.
Chinamo said in Special Economic Zones (SEZ), the main issue attracting investors is tax incentives; hence, these should be communicated efficiently through the integrated systems.
“It is upon us to make it clear what they mean, but the main issue is tax incentives and we hope it’s the beginning and that should go beyond that,” he said.
Like many other nations, Zimbabwe suffers from illicit financial flows through, among other means, tax evasion, avoidance, and duties by exploiting loopholes and exemptions.
Economist and former Reserve Bank of Zimbabwe Monetary Policy Committee member, Eddie Cross, recently said tax evasion has been a major challenge for the economy.
“Smuggling has been a major problem at the country’s “porous” borders owing to corruption. Tax evasion causes the shrinking of the formal sector and the loss of jobs,” he said.
He said all domestic manufacturers and producers are now feeling the threat of cheap imports and trading practices that do not pay duties or taxes at the borders.
Another economist, Dr Prosper Chitambara, said the government should relook at some of the tax incentives it is providing to foreign investors to ensure the government gets to benefit immediately once the investor has come in.
ZIMRA Commissioner General, Regina Chinamasa, said there has been a lot of activity happening on the digitalisation side of business, so this possibility of integrating the systems is an enhancement of the partnership that existed even before.
“We have already seconded two of our officers to come to ZIDA and give information to our new investors so that when they come on board, they are also aware of compliant issues that exist here in Zimbabwe,” she said.
She said ZIMRA is going to provide accurate, correct and timely information to the new investors, and it is going to create awareness in terms of the tax obligations that exist, giving ZIMRA a pre- and post-investor experience.
“It is also a challenge to say how best we can improve the post-investment period and make sure what is communicated at ZIDA in terms of the economic environment in Zimbabwe is also demonstrated in the experience.
“As we move forward, it is important that even where you are working on investment policy, you also have adequate information in terms of monitoring and evaluation of the nature and quality of our investments.
“On our side, we also need information upfront to know who we are dealing with in order to enhance compliance,” she said.
As part of their joint obligations, the parties will integrate their e-systems to ensure real-time logging in of investor information and real-time processing of queries and issues that affect the promotion, protection, and facilitation of investments in the country.
The parties will endeavour to resolve any policy inconsistencies between their respective regulatory frameworks and, to the best of their abilities, advocate for policy change, if necessary, to enhance the ease of doing business.
Vince Musewe, an economist, said Zimbabwe has too many tax loopholes and incentives for foreign investors that can be abused.
“What is needed is a tracking mechanism for foreign direct investment (FDI) inflows from source to production and accounting records.
“That would then provide evidence of what is actually happening on the ground, and one can then measure the impact of that FDI on tax revenues,” he said