Zimbabwe talks tough on taxes

via Zimbabwe talks tough on taxes | African Business | BDlive by Evan Pickworth 17 SEPTEMBER 2013

ZIMBABWE’S tax commissioner says the government wants to turn the country around following the damage caused by 15 years of deindustrialisation and investment outflows, but this does not mean going soft on tax penalties charged to multinational companies.

In calling for more dialogue with global enterprises to understand the nature of their businesses, Zimbabwe Revenue Authority commissioner-general Gershom Pasi took issue with Botswana’s “soft” tax penalty rates of 1.5% to 12% on Monday at the EY Africa Tax Conference. In Zimbabwe, he said, the penalty for a first tax offence is a maximum rate of 100% and then a maximum rate of 200% for subsequent offences.

“Penalties must serve a purpose. They should not be affordable and soft, else they cease to be penalties,” Mr Pasi said.

South Africa scrapped the discretionary power given to revenue authorities to levy additional tax of up to 200% in last year’s Tax Administration Act. The old penalty system has been replaced with a framework that ensures more consistent treatment of taxpayers and some penalties are as low as 5%, although obstructive or repeat offence taxpayers in South Africa in cases of intentional evasion, can still face 200% charges. Penalty rates in some of the other Sadc countries remain well below 200%.

Botswana has based its economic success on incentivising business and investment without the need for an official empowerment or indigenisation code, while Zimbabwe’s President Robert Mugabe began his new five-year term last month by pledging to launch an economic revolution in the form of the indigenisation programme, which was to be extended to all key aspects of the economy.

“We experienced 15 years or so of de industrialisation and dis investment and are seeking to turn that around. It led to informality, which is becoming more of a problem,” said Mr Pasi. He said while many multinationals still use “unpalatable practices” in their tax affairs, more dialogue with these firm s was needed.

As economies stutter, multinational companies have bemoaned their struggles with many tax authorities in Africa. Botswana’s customs commissioner Phodiso Vala-shia said it was “important to take deliberate steps” to engage with taxpayers to improve compliance.