#OpenForBusiness: Over 4 000 Big Firms Evade Tax

Bulawayo - More than 4 000 big businesses in Zimbabwe are not registered with the Zimbabwe Revenue Authority (Zimra) for tax purposes, Finance Minister Professor Mthuli Ncube has revealed. 

Already, treasury has projected a fiscal deficit of 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 by raising taxes on individuals and businesses to levels that leave the deficit at levels that do not undermine the emerging economic green shoots.

Presenting the Government’s Transitional Stabilisation Programme (TSP), the minister said robust tax administration measures had 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 tax debt of close to $4 billion, 23 percent or about $1 billion of it in interest, while 27 percent, amounting to $1,1 billion related to penalty charges, said Treasury.
Zimbabwe Finance Minister

“Growing revenue collections will 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.”
Ncube said 50 percent of the total tax debt of $4 billion, some of it dating before 2014, comprises interest and penalties, with the principal debt at $2 billion, accounting for the other half. 

He announced that Government would be reviewing interest and penalties on tax defaults by implementing a “penalty loading model” from January 2019, as part of the TSP goals. He said measures to reduce non-tax compliance would 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 nurture emerging green shoots of the new Dispensation would be considered across various tax payer categories.

The Minister lamented rampant illicit financial activities in the economy, including tax avoidance. In line with the “Zimbabwe is open for business” mantra, the Minister said prudent approaches were being put in place to foster voluntary compliance by tax payers. 

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.

Government also wants to correct fiscal imbalances that threaten financial sector as reflected in the spiralling out of control of 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.

“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. - The Herald 

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