ZNCC proposes new tax measures

Published: 30 October 2013

THE Zimbabwe Chamber of Commerce has advised government to immediately review the country's income taxes, criticising the current tax regime as stifling business growth and investment.

Submitting a paper on the current state of local industry before a Parliamentary Portfolio Committee on Industry and Commerce yesterday, ZNCC chairperson-in-charge of the macro-economic committee Brains Muchemwa said the economy was stuck in an untenable low equilibrium position characterised by low capacity utilisation, low wages and high unemployment rates.

The chamber proposed a raft of measures which included an increase in the country's tax free threshold in a bid to stimulate domestic consumption. ZNCC called for measures which also ensured growth of small to medium enterprises which, according to official figures, was fast emerging as one of the most critical economic sectors.

"The tax levels in this country are very high and a deterrent to increased economic activity. There is merit in reducing tax levels to levels that will stimulate expenditure. In particular, the pay as you earn tax free thresholds need to be revised to levels that are at par with the poverty datum line so as to stimulate demand, expenditure and production," Muchemwa said.

"The government should then be in a position to recoup its revenues from value added tax and other production and expenditure related taxes. Let's grow the economy by avoiding punitive taxation levels, but aim to increase revenue flows to the fiscus as the economy grows."

Zimbabwe's poverty datum line is estimated at just over $500. This development came at a time the Zimbabwe Revenue Authority (Zimra) missed its quarterly revenue collection target quarter weighed down by subdued mining royalties and declining industrial output. In its revenue performance report for the third quarter ending September, the authority reported that collections amounted to $897,3 million against a target of $904,9 million, resulting in a negative variance of 1%.

Collections under individual tax amounted to $211,3 million against a target of $171,2 million, resulting in a positive variance of 23%.Value-added tax contributed 32% of the total revenue collected, followed by individual tax (24%), while excise duty was third with a contribution of 15%.

"The lowest threshold of $250 per month for PAYE purposes must be increased as this brings in domestic and farm workers into the PAYE scales, especially if their transport and housing benefit is taken into consideration," Muchemwa said.

Industrial capacity utilisation according to the Confederation of Zimbabwe Industries dropped from 44,6% in 2012 to 39,6% in 2013. This, experts say, has negatively impacted on the performance of many companies and consequently on the performance of company tax.

- newsday