Concern over Zim’s multiple taxes

Source: Concern over Zim’s multiple taxes – DailyNews Live

Eric Chiriga      29 March 2017

HARARE – The raft of taxes imposed by the hard-pressed government could do
more harm than good to Zimbabwe’s economy, as the move overburdens
long-suffering citizens and threatens small businesses’ survival, economic
analysts have warned.

They said as the desperate President Robert Mugabe administration “lays
hands on anything that gives it money”, the latest move to target the
informal sector – currently sustaining the country’s moribund economy –
poses a risk of killing the goose that lays the eggs.

Last Friday, government gazetted new taxes for commuter transport
operators, hairdressers, driving schools and cross-border traders.

The informal traders will pay at least $10 per month – a move widely
viewed as overburdening long-suffering Zimbabweans.

Apart from taxing the informal sector, government has also introduced a
five percent health levy on airtime while the struggling citizens also pay
the Aids Levy and their salaries are significantly taxed under
pay-as-you-earn (Paye) of at least 20 percent.

Motorists are also taxed through toll gate fees and vehicle licences and
authorities are planning to introduce urban tolling.

Recently, the government imposed a 15 percent value added tax (VAT) on
meat and potatoes, which was later reversed following fierce outrage by
consumers.

Respected economist Witness Chinyama said “the current economic situation
has pushed the government to look for anything they can tax to meet their
monthly obligations. This shows they are desperate to get money from any
source they can lay their hands on”.

“The problem with trying to formalise the informal sector is that the
informal sector will simply go underground and the economy will go down as
well,” he said.

“At one point, the government also tried to tax basic commodities such as
potatoes and rice until people complained and the decision was reversed,”
Chinyama said.

“It is also important for the government to encourage production and
re-engage with other countries as a way of boosting revenues,” he said,
adding that rather than target the informal businesses, which are
struggling to keep up in the prevailing tough economic environment,
“government must create a conducive environment for the sector to thrive”.

According to the Zimbabwe National Statistics Agency (ZimStat)’s 2015
report, 94,5 percent of the 6,3 million people defined as employed in the
country work in the informal economy.

Not only is the size of the informal sector important, but the extent and
speed of the industry’s growth.

Comparable data for 2011 – published by ZimStat – indicate that in the
three years to 2014, informal sector employment grew by a staggering 29
percent, from 4,6 million to 5,9 million jobs.

Another economist, Francis Mukora, told the Daily News “although taxing
the informal sector may sound like a great idea to the broke Zanu PF
government, they should proceed with caution as there are no quick fixes
to the country’s multi-faceted crisis”.

“Almost all of the informal traders such as street vendors and backyard
business operators are extremely poor people with no assets, savings or
social safety nets to fall back. Taxing these low-income families is not
only insensitive on the part of government but also heartless,” he said.

“We must never lose sight of the fact that small and medium enterprises
(SMEs) are currently paying tax, one way or another,” Mukora warned,
further stating that “they are saddled with VAT, import duty, council
levies and a plethora of other taxes”.

“To continue accusing the small businesses for the State’s ever-dwindling
revenue base and collections is unhelpful. The government must first get
its politics right and everything will fall into place,” he said.

Following concerns by legislators over government’s multiple taxes,
Finance minister Patrick Chinamasa recently said “if you do not want to be
taxed, please do not . . . expect better service delivery”.

“Our people in the informal sector do not want to be taxed. When a black
person takes over a business, they do not want to pay taxes. If we want
good health, education and roads, we need to have a culture of paying
taxes. Who then is supposed to pay taxes, as I cannot tax foreigners?” the
Treasury chief was quoted as saying in the local media.

Chinamasa said for every $100 collected as revenue, three percent was
going towards service delivery while the rest was gobbled by the bloated
civil service wage bill.

Government has been struggling to service its burgeoning expenditure and
pay civil servants on time due to severely strained revenue streams.

Meanwhile, according to last Friday’s gazette, authorities were given
legal teeth to compel the “operators of hairdressing salons (to pay) $10
per chair per month” while “informal cross-border traders (will pay) 10
per centum of the value for duty purposes of the commercial goods being
imported…”

“Operators of omnibuses for the carriage of passengers with a seating
capacity for 15 to 25 passengers will be required to pay $45 while those
of between 25 and 36 passengers will part with $70 a month,” it added.

The new wave of taxes, with effect from January 1, 2017, brought into
being by the Finance Act 2017, will also affect driving school operators,
with those for class four vehicles being required to pay $100 per month.

Class one and two vehicle operators will part with $130 a month.

“The presumptive tax chargeable in terms of Section 36C of the Taxes Act
shall be in case of . . . operators of taxi cabs for the carriage of
passengers for hire or reward having seating accommodation for not more
than seven passengers, $25 per month for each such taxi cab so operated,”
the gazette reads.

“Operators of goods vehicles having a carrying capacity of more than 10
tonnes but less than 20 tonnes, $200,” the gazette reads, adding that
goods vehicles of 20 tonnes or more will be required to pay $500 per
month.

Companies which are not resident in Zimbabwe but “carries on a business in
the country through a permanent establishment in Zimbabwe” will be liable
to tax.

The meaning of permanent establishment, according to the gazette, is a
company that has a fixed place of business in the country through which
the business of the company is wholly or partly carried on.

However, there was some relief for small-scale miners whose presumptive
tax is being calculated at zero percent of each dollar of the purchase
price of metals.