More than 4 000 big businesses in Zimbabwe are not registered for tax purposes with the Zimbabwe Revenue Authority (Zimra), Finance and Economic Development Minister, Prof Mthuli Ncube revealed on Friday.
Presenting the new Government’s Transitional Stabilisation Programme (TSP), the Minister said robust tax administration measures have been adopted to increase compliance and widen domestic revenue mobilisation, which is critical for oiling economic growth.
The interventions come at a time when Zimra is sitting on a total tax debt of close to $4 billion, of which 23 percent or about $1 billion is interest, while 27 percent, amounting to $1,1 billion relates to penalty charges, said Treasury.
“Growing revenue collections will also entail widening the tax base and also strengthening compliance levels of the more than 4 000 big businesses estimated to be operating without registering for tax purposes with Zimra. These companies are therefore outside the tax bracket,” said Prof Ncube. He did not name the concerned businesses.
“Pursuant to this, Zimra will be bringing in all those who are outside the tax net to also begin contributing to the fiscus. This also entails enhancing capacity through training of Zimra staff to be able to net all tax dodgers to ensure they also pay taxes for the realisation of the vision towards an upper-middle income society by 2030.”
Minister Ncube said 50 percent of the total tax debt of $4 billion, some of which dates back to before 2014, comprises of interest and penalties, with the principal debt at $2 billion, accounting for the other half. He announced that Government will be reviewing interest and penalties on tax defaults through implementation of the “penalty loading model” from January 2019, as part of the TSP goals. He said measures to overcome some of the reasons behind non-tax compliance will be swiftly implemented.
“This includes review of tax administration to ease the payment of tax, adoption of online payment methods, intensification of tax education, as well as public campaigns to bring tolerance and acceptance of taxation as a national duty rather than a burdensome exercise,” said Prof Ncube.
Furthermore, he said overall review of the general tax structure to facilitate nurturing emerging green shoots of the new Dispensation will be considered across various tax payer categories.
The Minister lamented rampant illicit financial activities in the economy, including tax avoidance. He said these have necessitated adoption of tough measures to enforce sanity in the economy, especially towards aggressive tax planning structures in line with the transfer pricing framework that was introduced into the Zimbabwe Tax Law in January 2016.
In line with the “Zimbabwe is open for business” mantra, the Minister said prudent approaches were being put in place to foster cooperative voluntary compliance by tax payers with regards to honouring tax obligations and lowering default rates. These include beefing tax administration capacity, modernising infrastructure and integrated Information Communication Technology (ICT) systems to enhance ease of payments while reducing waiting period for tax clearance at ports of entry, and hours at tax collectors’ offices.
As part of the TSP, Government seeks to correct fiscal imbalances that threaten financial sector vulnerabilities as reflected through spiralling out of control cash shortages and distortions in the foreign exchange market. Prof Ncube has admitted these are linked to the fiscal deficit of $1,4 billion as at first half of 2018, and its financing through the overdraft at the Reserve Bank and over-issuance of Treasury bills.
Treasury has projected fiscal deficit at over $2,7 billion in the absence of corrective measures. This has also been blamed for crowding out private sector lending and limiting room to mobilise significant additional revenue through raising taxes on individuals and businesses to levels that leave the deficit at levels that would not undermine the emerging economic green shoots.
Government has already pronounced implementation of austerity measures to contain public expenditures over the period January 2019 to December 2020 with a target to support gradual recovery in budget expenditures on essential infrastructure.
“Fiscal discipline will entail budget surpluses in support of funding the capital budget. Measures to control and manage budget expenditures to create fiscal space in support of infrastructure investments are part of this Transitional Stabilisation Programme,” said Prof Ncube.
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