INDUSTRY and commerce have urged Government to further ease the tax burden on businesses and individuals through tax adjustments in the upcoming 2024 National Budget.
This comes after the Zimbabwe Revenue Authority (ZIMRA) introduced a new tax system in a bid to revolutionise the tax administration terrain in the country through an efficient, effective and easy-to-navigate system based on a digital platform.
Known as the Tax and Revenue Management System, it is a product of ZIMRA’s business process re-engineering (BPR) programme launched in 2022.
The BPR identified digitalisation as the key aspect of improved service delivery to ZIMRA’s diverse clients.
In its submissions to the Ministry of Finance and Investment Promotion for the 2024 national budget, the Zimbabwe National Chamber of Commerce (ZNCC) said tax alignments and incentives will result in a sustainable revival of the economy and employment creation.
There is a huge disparity in the tax-free threshold in Zimbabwe dollar and US dollar terms as local currency earners are being prejudiced, and the tax policy, thus, lacks fairness, which is one of its basic principles.
“Our appeal to the Ministry of Finance and Investment Promotion is to consider revising the tables and having them aligned with the economic environment or fixing the employment tax tables in USD but payable at the prevailing interbank rate.
“Therefore, given the high inflation environment, the tax-free thresholds should be set in one currency, preferably the US dollar, and payable at an equivalent interbank rate in the local currency,” ZNCC said.
“Using an interbank exchange rate of US$1/ZWL5,200 (September 25, 2023), the ZWL equivalence of US$1 200 would amount to ZWL6 240 000 per annum, while the ZWL would amount to a paltry US$480.”
The business representative body also indicated that the bonus threshold should be reviewed, in line with the current economic environment.
ZNCC said value-added tax (VAT) should be reduced from 15 percent to 14 percent in an endeavour to boost aggregate demand in the economy.
In the 2023 National Budget, Government increased VAT from 14.5 percent to 15 percent, and the additional cost of 0.5 percent was pushed to the consumer, adding a burden to the overly taxed population and, thus, reducing consumer welfare.
“Overall, aggregate demand in the economy was also reduced as disposable incomes were negatively affected,” ZNCC said in its submissions.
The organisation said Government is the biggest consumer in the economy, and once a company issues an invoice to Government, settlements are made in about 6 months or even more, yet businesses are compelled to pay VAT regardless of whether the payment is received or not.
ZNCC said the current setup is that a fiscal tax invoice should be issued within 30 days of supply, and on or before the 25th of every month, VAT returns should be submitted. However, in some cases, payment will not have been received by then, it added.
“Our request is that 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, and turnover tax is being used as an avenue in other countries, and it can also be used as an option by ZIMRA,” reads the ZNCC submissions.
ZNCC said when the 2 percent intermediate money transfer tax (IMTT) was introduced, the motive behind doing so was to bring into taxation the informal sector. This sector was not being taxed; but the formal sector was overtaxed.
ZNCC said businesses are incurring the IMTT, even when paying tax dues to ZIMRA; thus, it is a tax on tax, and to cushion supply chain players against the increased cost of production, the cost is being 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 businesses, and therefore, the chamber proposes that the Ministry of Finance should allow the IMTT to be tax-deductible and remove it when remitting tax to ZIMRA,” the chamber said.
ZNCC said when the IMTT was introduced, the value of the tax-exempt transactions was at most US$10, and in the 2022 mid-term budget statement, Government proposed to increase the value of tax-exempt transactions from $1,000 to $2,500.
“As the exchange rate continues to depreciate, and to cushion the 44 percent of Zimbabweans from 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 corporations,” ZNCC said.
It said Government should deepen the use of the Zimbabwe dollar by making it mandatory that payments for any Government service be settled in the local currency.
The chamber said Government should be the leader, as the issuer of the domestic currency, in accepting and reporting in the local currency.
“The need for our currency to function and be accepted in both the public and private sectors cannot be overemphasised. All taxes, fees and levies should be paid in the local currency,” it said.
Meanwhile, Finance and Investment Promotion Minister Professor Mthuli Ncube said his upcoming 2024 National Budget will, among other things, prioritise more funding for the agriculture and mining sectors to enhance job creation and poverty alleviation.
Speaking during a pre-budget seminar, he said the national budget would also focus on consolidating economic gains and transformation.